Sector Power Page 2 Cross-industry mergers to have long-term impact.

Transcription

1 PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE. CHINA Sector Power Page 2 Cross-industry mergers to have long-term impact. Results Ctrip.com International (CTRP US/BUY/US$56.13/Target: US$65.00) Page 4 1Q17: Earnings beat estimates on strong margin expansion. INDONESIA Results Indocement TP (INTP IJ/SELL/Rp16,775/Target: Rp14,000) Page 7 1Q17: Another set of weak results. MALAYSIA Sector Plantation Page 10 Apr 17: Inventory inches up to 1.60m tonnes with increase coming in smaller than market expectations. CPO production improves on Sabah s production recovery. Results SP Setia (SPSB MK/HOLD/RM3.68/Target: RM3.61) Page 12 1Q17: Expect earnings in the coming quarters to be chunky as the group recognises RM1.3b in revenue from its London development. SINGAPORE Results City Developments (CIT SP/HOLD/S$10.85/Target: S$11.40) Page 15 1Q17: Downgrade to HOLD post strong share price performance. First Resources (FR SP/BUY/S$1.96/Target: S$2.15) Page 18 1Q17: Net profit of US$46.0m (-4.4% qoq, +>100% yoy), supported by higher ASP. Results slightly above expectation on stronger-than-expected realised PK prices. Wilmar International (WIL SP/HOLD/S$3.43/Target: S$3.50) Page 21 1Q17: Core net profit of US$313m (-47.0% qoq, +40.5% yoy), above expectations. Restructuring China operation and possibly listing it. THAILAND Results Bangkok Expressway and Metro (BEM TB/BUY/Bt7.25/Target: Bt9.00) Page 24 1Q17: Despite strong sales growth, earnings were flat yoy on high operating costs of new services. KCE Electronics (KCE TB/HOLD/Bt111.00/Target: Bt102.00) Page 27 1Q17: High expectations factored in. PTT Global Chemical (PTTGC TB/BUY/Bt73.50/Target: Bt83.00) Page 30 1Q17: Could be this year s peak quarter; potential 2017 earnings upgrade from both consensus and us. SAPPE (SAPPE TB/BUY/Bt24.20/Target: Bt33.50) Page 33 1Q17: Weak earnings; 2Q17 earnings should improve qoq. KEY INDICES Prev Close 1D % 1W % 1M % YTD % DJIA (0.1) (0.2) S&P (0.2) FTSE AS (1.0) 3.4 CSI (1.4) (4.4) 1.4 FSSTI HSCEI HSI JCI (0.8) KLCI KOSPI Nikkei SET (0.6) (0.9) (2.5) 0.5 TWSE BDI (19.8) 5.3 CPO (RM/mt) (2.6) (12.5) Brent Crude (9.7) (10.6) (US$/bbl) Source: Bloomberg TOP PICKS Ticker CP (lcy) TP (lcy) ot. +/- (%) BUY Alibaba BABA US Beijing Ent. Water 371 HK Indosat ISAT IJ 7, , Tiga Pilar AISA IJ 2, , V.S. Industry VSI MK OCBC OCBC SP Bangkok Dusit BDMS TB Siam Cement SCC TB SELL Great Wall Motor 2333 HK (27.2) MGM China 2282 HK (10.1) Hartalega HART MK (28.6) KEY ASSUMPTIONS GDP (% yoy) F 2018F US Euro Zone Japan Singapore Malaysia Thailand Indonesia Hong Kong China Brent (Average) (US$/bbl) CPO (RM/mt) 2,653 2,600 2,500 Source: Bloomberg, UOB ETR, UOB Kay Hian CORPORATE EVENTS Venue Begin Close Tea Session with Health Mgm Int l Singapore 12 May 12 May Roadshow with Q Technology Group Hong Kong 12 May 12 May Roadshow with Tonly Electronics Hong Kong 15 May 16 May Holdings Shenzhen 17 May 17 May Shanghai 18 May 18 May Analyst Presentation on M sia Outlook Hong Kong 17 May 17 May and Strategy and Regional Gaming Roadshow with IGG Inc Taipei 18 May 18 May Site visit to: Fosun Pharma Group Shanghai 18 May 19 May Shanghai Pharma Holding Shanghai 18 May 19 May Mircoport Scientific Corp Shanghai 19 May 19 May Roadshow with Petronas Dagangan Bhd Hong Kong 23 May 23 May Analyst Marketing on China Internet Hong Kong 22 May 23 May Sector Singapore 24 May 24 May Kuala Lumpur 25 May 26 May Roadshow with Singtel Canada 26 May 26 May Roadshow with Tongda Group Holdings Hong Kong 1 Jun 1 Jun Roadshow with PT Siloam Int l Hospital Canada 5 Jun 16 Jun Luncheon with United Overseas Bank Singapore 3 Jul 3 Jul Roadshow with Top Glove Corporation US/Canada 5 Sep 12 Sep 1

2 SECTOR UPDATE Power China Cross-industry Mergers To Have Long-term Impact China is discussing the possibility of cross-industry mergers among IPPs, coal players and nuclear energy companies, all at the group level. We think this goes against the principle of electricity market reform and will instead help stabilise the earnings of coal IPPs. We think this would be negative for China Shenhua and nuclear energy companies due to dilution to their asset quality. We upgrade the sector to MARKET WEIGHT on improving industry fundamentals. WHAT S NEW Cross-industry mergers to emerge. Recently, the media reported that China is considering cross-industry mergers among the five biggest IPP groups, China Shenhua and two major nuclear energy companies. The proposal is to merge these eight groups into three power giants, ie, a) China Shenhua Group, Datang Group and China General Nuclear Corporation, b) Guodian Group, Huadian Group and China National Nuclear Corporation (CNNC), and c) Huaneng Group and State Power Investment Group. MARKET WEIGHT (Upgraded) TOP PICK Company Ticker Share Target Upside (%) Price (HK$) Price (HK$) Huadian 1071 HK Source: UOB Kay Hian We think the mergers are highly possible. The proposal is only under discussion but we think the mergers are highly possible because they are in line with China s supplyside reform policy. The mergers are being considered to control the oversupply situation in various industries. In China, both power and coal are also in oversupply. Smaller players also likely to be included in mergers in the future. We think the proposed mergers are just the start of consolidation in the power industry, given that the above eight power groups are the largest in China. Next, we think smaller players, including China Coal, will also be included in the big merger plan. ESSENTIALS IPP groups are beneficiaries of the potential mergers. We think the mergers would help improve the asset quality of IPP groups. Compared with China Shenhua, IPPs do not have a low-cost advantage. Compared with the two nuclear energy companies, the five IPP groups, which focus on thermal power, are facing serious overcapacity. On the other hand, nuclear power benefits from China s supportive policies, given its clean nature. The mergers would improve industry concentration, implying higher pricing power. Under the proposed mergers of the eight biggest energy groups in China, we think the power supply market would move towards a more monopolistic position. As at end-15, the eight energy groups had a total power capacity of 784GW, accounting for 51% of total market share. When they merge, over half of the power supply market will be dominated by the three biggest power suppliers. This will increase their bargaining power significantly. We think the mergers would go against China s electricity market reform, which encourage competition among IPP groups. In the recent couple of years, the liberalisation in China s electricity market has been promoted heavily. The proportion of direct supply, which has a discounted power tariff (12%, 5 Rmb cent/kwh on average), has increased to 20% in 2016 from only 5% in Based on China s policy issued in 2016, the government aimed to fully open directly supply to all industrial and commercial users in 2018 and 2020 respectively. This suggests that about 70% of the total power supply will be sold via direct supply. With increasing industry concentration, we think the IPP industry would have more pricing power to negotiate the tariff for direct power supply. In fact, in the last few years, IPP groups have reached a consensus not to cut prices too much. Therefore, they think the current price discount for direct supply is still reasonable. Once they merge, we think the price discount would be even narrower. ANALYSTS Yan Shi (804) yan.shi@uobkayhian.com Yinglei Li (819) yinglei@uobkayhian.com 2

3 Not so good for China Shenhua and the two nuclear energy companies. Assuming that China Shenhua will merge with Datang Group, we think China Shenhua has to help absorb Datang s huge loss-making coal-chemical business. The two nuclear energy companies, which have great growth potential, would be significantly diluted by trading thermal power which is in overcapacity and highly discouraged by the government due to air pollution. Coal prices retreated, the worst is over. In 1Q17, the average QHD benchmark coal price was Rmb618/tonne, down 4% from the peak in 4Q16. Currently, with production resumed, coal prices have retreated to Rmb590/tonne and we think it will drop further to Rmb550/tonne in 2Q16. Therefore, we think the IPP industry would turn around in 2Q17 with a bigger profitability in 2H17. Tariff hike may come earlier than expected. We had expected a tariff hike of 1 Rmb cent/kwh to only happen in Now, we think it may come earlier than expected in early-2h17 because the government has completed the survey on power tariff in 1Q17. We think the authorities might need to find the right timing to announce the tariff hike and we guess this is likely to be in 2H17 when coal prices retreate to Rmb550/ton, which is round Rmb80/ton higher than 2016 level. The 1 Rmb cent/kwh tariff hike would offset the Rmb20/ton increase in coal prices. EARNINGS REVISION We assume a tariff hike of 1 Rmb cent/kwh for 2018 to factor the narrowing price discount for direct supply given higher pricing power from the merger. Accordingly, we raise our 2018 net profit forecasts for the various listed IPPs by %, and our DCF-based target prices for IPPs by %. EARNINGS AND TARGET PRICE REVISION Company 2018 Net Profit (Rmbm) Target Price (HK$) Old New % chg Old New % chg CR Power 6,100 6, Huaneng 5,733 6, Datang 2,612 2, Huadian 2,770 3, CPI 2,736 2, Source: UOB Kay Hian ACTION Upgrade to MAREKT WEIGHT. We think the worst is over for Hong Kong-listed IPPs, given weak coal prices and China s policy to eliminate overcapacity. Currently, the sector is trading at 0.8x 2017F P/B, which is at the trough level. We also upgrade Huaneng to HOLD and Huadina to BUY. Our top pick is now Huadian Power, given its highest earnings sensitivity to coal prices, which will turn the company around from losses in 1Q16. Among all IPPs, we think Datang is the top beneficiary of the potential merger given the poorest asset quality for its parent Datang Group. We however maintain HOLD because: a) the proposal is at early stage of discussion and the final decision may not be as expected, and b) Datang s share price has surged ever since there were market discussions about the proposed merger since March. We think the positives have already been priced in. MONTHLY COAL PRICE QHD SPOT VS THERMAL COAL INDEX (Rmb/tonne) QHD spot Thermal coal index Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr n.a. Current 590 n.a. Source: Bloomberg, UOB Kay Hian STATISTICS OF THE EIGHT ENERGY GROUPS Capacity (GW) Market share (%) Total asset (Rmbb) Shenhua Group China General Nuclear Power Group Datang Group Sub-total ,093 Huadian Group Guodian Group CNNC Sub-total ,006 Huaneng Group State Power Investment Corp Sub-total ,746 8 groups in total ,845 National total 1, n.a. Source: Respective companies; UOB Kay Hian PEER COMPARISON Last Target Market Net Profit EPS PE P/B Yield ROE Stock Ticker Rec. Price Price Cap F 2018F F 2018F F 2017F 2017F 2017F 2017F (HK$) (HK$) (US$m) (Rmbm) (Rmbm) (Rmbm) (Rmb) (Rmb) (Rmb) (x) (x) (x) (x) (%) (%) CR Power* 836 HK HOLD ,881 7,708 6,311 6, Huaneng 902 HK HOLD ,350 8,520 4,873 6, Datang 991 HK HOLD ,518-2,754 1,984 2, Huadian 1071 HK BUY ,510 3,128 2,461 3, CPI 2380 HK BUY ,739 2,366 2,567 2, Sector Note: CR Power s financials are in HK$. Source: Bloomberg, UOB Kay Hian 3

4 COMPANY RESULTS Ctrip.com International (CTRP US) 1Q17: Earnings Beat Estimates On Strong Margin Expansion 1Q17 revenue came in 2% above consensus estimates on strong transportation revenue growth. Non-GAAP net profit increased 131% yoy to Rmb604m, beating consensus by 27%. Non-GAAP EPS was Rmb1.10. Gross margin and non-gaap operating margin expanded 8ppt and 15ppt yoy to 80.5% and 15.4%. CTRP guides 2Q17 net revenue growth of 40-45% yoy, in line with consensus. We raise our target price to US$65.00 to reflect the strong margin expansion. Maintain BUY. RESULTS Top-line in line; solid 2Q17 outlook. Ctrip.com International s (Ctrip) net revenue rose 46% yoy to Rmb6.1b in 1Q17. Accommodation revenue grew 28% yoy to Rmb2.1b (previous guidance: % yoy). Transportation revenue grew 48% yoy to Rmb2.9b (previous guidance: % yoy), benefitting from strong revenue growth of over 100% yoy from other ticketing services (15-20% of transportation revenue) as well as consolidation of Skyscanner. The company guides 2Q17 revenue to grow 40-45% yoy, with accommodation revenue to rise 25-35% yoy, transportation to rise 40-50% yoy and packaged tour to rise 20-30%, all in line with consensus estimates. Earnings beat forecast on strong margin expansion. In 1Q17, non-gaap net profit increased 135% yoy to Rmb604m, beating consensus estimate by 27%, thanks to betterthan-expected margin expansion. Gross margin expanded 8ppt yoy and 3ppt qoq to 80.5%, (1Q16: 73%, 4Q16: 78%), thanks to higher gross profit contribution from Skyscanner (up 1-2ppt) and increasing operating efficiency resulting from the automation of call centres. Non-GAAP operating margin expanded to 15.4% from 0.2% in 1Q16. Management guided for non-gaap operating profit of Rmb0.9b-1.0b in 2Q17, implying a 15% non-gaap operating margin, beating our previous 13.2% estimate. Continued penetration into low-tier cities. Ctrip continued its penetration into low-tier cities and lower-tier hotels which has achieved 90% yoy results growth in 1Q17 and about 100% yoy average in the most popular lower-tier cities in this May Day holidays. Ctrip will continue its heavy investments in lower-tier cities to prioritise market share expansion, but it is confident that the non-gaap operating margin of its China market will return to 20-30% in the next 1-2 years. Overseas expansion gaining synergy from investees. In 1Q17, outbound travel on Ctrip platform remained strong despite the sector decelerating. Outbound travel contributes around 30% of transportation revenue and 20% of hotel booking revenue will still be a year of heavy overseas investment, Ctrip will also enhance its one-stop global travel services, especially outside of Asia, via cooperation with Skyscanner, MakemyTrip, and Priceline. KEY FINANCIALS Year to 31 Dec (RMBm) F 2018F 2019F Net turnover 10, , , , ,358.4 EBITDA (849.6) 4, , ,053.3 Operating profit (1,568.5) 3, , ,198.0 Net profit (rep./act.) 2,507.7 (1,430.7) 3, , ,031.2 Net profit (adj.) 1, , , , ,063.6 EPS (fen) , ,664.3 PE (x) P/B (x) EV/EBITDA (x) n.m Dividend yield (%) Net margin (%) 23.0 (7.4) Net debt/(cash) to equity (%) (25.6) 0.5 (10.8) (24.3) (39.0) Interest cover (x) n.a. (5.2) ROE (%) 9.3 n.a Consensus net profit - - 3,890 6,809 9,665 UOBKH/Consensus (x) Source: Ctrip, Bloomberg, UOB Kay Hian BUY (Maintained) Share Price Target Price US$56.13 US$65.00 Upside +26.1% (Previous TP US$60.00) COMPANY DESCRIPTION Ctrip is the largest online travel agency in China. It offers direct booking for travel products including hotel reservations, airline ticketing, packaged tours and corporate travel. STOCK DATA GICS sector Consumer Discretionary Bloomberg ticker: CTRP US EQUITY Shares issued (m): Market cap (US$m): 28, mth avg daily t'over (US$m): Price Performance (%) 52-week high/low US$56.13/US$ mth 3mth 6mth 1yr YTD Major Shareholders % Baidu Entities 20.1 Priceline Entities 8.9 FY17 NAV/Share (Rmb) FY17 Net Cash/Share (Rmb) PRICE CHART (lcy) CTRIP.COM INTERNATIONAL-ADR CTRIP.COM INTERNATIONAL-ADR/indu index (%) 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Volume (m) Julia Pan ext 808 juliapan@uobkayhian.com Olivia Li ext 858 oliviali@uobkayhian.com

5 STOCK IMPACT Penetration into low-tier cities with new initiatives. With the triple-digit increase in earnings, Ctrip will continue its heavy investment in low-tier cities. It will expand its product offerings in low-tier cities, covering from the traditional hotel and air ticketing to bus tickets, ferry tickets, rental car services etc. Ctrip will leverage on online-to-offline resources to further its penetration into low-tier cities. Currently, it has over 5,500 offline franchise stores, most of them in tier-2/3 cities, and these stores are generating healthy profits. Ctrip plans to open 1,000 more franchise stores nationwide to provide customers with one-to-one services.. Solid margin outlook. We see a solid margin outlook, given that the synergy with Skyscanner is taking off, thanks to strong top-line growth, increased scalability and better allocation of resources. 1Q17 RESULTS (RMB m) 1Q16 4Q16 1Q17 YoY QoQ Cons Var Revenue 4,399 5,179 6,133 39% 18% Accommodation reservation 1,614 1,848 2,070 28% 12% Transportation ticketing 1,949 2,446 2,875 48% 18% Packaged tour % 50% Corporate travel % -19% Others % 43% Net revenue 4,178 5,067 6,085 46% 20% 5,979 2% Cost of services -1,136-1,126-1,189 5% 6% Gross profit 3,042 3,941 4,896 61% 24% GPM 72.8% 77.8% 80.5% 8 ppt 3 ppt 76.9% 4 ppt Operating expenses -4,869-3,734-4,482-8% 20% S&M -1,359-1,402-1,832 35% 31% G&A % 25% R&D -1,325-1,384-1,679 27% 21% SBC -1, % -11% Non-gaap operating profit % 17% Non-GAAP OPM 0.2% 15.7% 15.4% 15 ppt 0 ppt Net profit -1, NM -87% PBT -1, NM NM Non-GAAP net profit 257 1, % -51% % Non-GAAP NPM 6.2% 24.4% 9.9% 4 ppt -14 ppt Diluted EPADS (RMB) NM -87% Non-GAAP diluted EPADS (RMB) % -50% % Source: Ctrip, Bloomberg, UOB Kay Hian EARNINGS REVISION/RISK We raise our revenue estimates by 0.2% each on stronger growth outlook, ticketing revenue expansion and solid outbound travel growth. We raise our EPS estimates by 3% and 6%, thanks to higher operating leverage. We forecast EPS CAGR of 41% in VALUATION/RECOMMENDATION We raise our target price to US$65.00 (from US$60.00) to reflect the better-than-expected margin recovery. SHARE PRICE CATALYST Successful implementation of new initiatives to penetrate further into low-tier cities. TRANSPORTATION GROWTH Source: Ctrip, UOB Kay Hian ACCOMODATION GROWTH Source: Ctrip, UOB Kay Hian MARGIN RECOVERY Source: Ctrip, UOB Kay Hian EARNINGS REVISION (%) 2Q17F 2017F 2018F Gross revenue Gross profit Non-GAAP operating profit Non-GAAP operating 2.0ppt 1.7ppt 1.3ppt margin Non-GAAP net profit Non-GAAP diluted EPS Source: UOB Kay Hian Better synergy with Skyscanner, especially in expanding the international business. Stable margin improvement. 5

6 PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Rmbm) F 2018F 2019F Year to 31 Dec (Rmbm) F 2018F 2019F Net turnover 19, , , ,358.4 Fixed assets 5, , , ,423.4 EBITDA (849.6) 4, , ,053.3 Other LT assets 92, , , ,315.6 Deprec. & amort ST debt n.a. n.a. n.a. n.a. EBIT (1,568.5) 3, , ,198.0 Cash/ST investment 34, , , ,446.4 Total other non-operating income (26.8) (100.0) Other current assets 11, , , ,950.5 Net interest income/(expense) (164.8) (151.9) (76.2) (144.6) Total assets 144, , , ,135.9 Pre-tax profit (1,760.1) 3, , ,053.4 Other current liabilities 30, , , ,792.4 Tax (478.0) (743.6) (1,516.4) (2,210.7) LT debt 34, , , ,274.3 Minorities Other LT liabilities 3, , , ,947.4 Net profit (1,430.7) 3, , ,031.2 Shareholders' equity 71, , , ,137.9 Net profit (adj.) 2, , , ,063.6 Minority interest 3, , , ,983.9 Total liabilities & equity 144, , , ,135.9 CASH FLOW KEY METRICS Year to 31 Dec (Rmbm) F 2018F 2019F Year to 31 Dec (%) F 2018F 2019F Operating (4,917.3) 12, , ,198.2 Profitability Pre-tax profit (1,760.1) 3, , ,053.4 EBITDA margin (4.4) Tax (478.0) (743.6) (1,516.4) (2,210.7) Pre-tax margin (9.2) Deprec. & amort Net margin (7.4) Associates ROA n.a Working capital changes (4,128.0) 7, , ,167.1 ROE n.a Non-cash items Other operating cashflows Growth Investing (35,387.9) (3,598.4) (1,518.2) (1,619.1) Turnover Capex (growth) (682.8) (751.1) (826.2) (908.8) EBITDA (221.8) n.a Capex (maintenance) Pre-tax profit (158.6) n.a Investments (34,698.9) (2,847.3) (692.0) (710.2) Net profit (157.1) n.a Proceeds from sale of assets Net profit (adj.) Others (6.2) EPS Financing 44,859.0 (1,273.3) (5,156.2) (3,319.6) Dividend payments Leverage Issue of shares 28, Debt to total capital Proceeds from borrowings 16,296.1 (1,121.4) (5,080.0) (3,175.0) Debt to equity Loan repayment Net debt/(cash) to equity 0.5 (10.8) (24.3) (39.0) Others/interest paid 77.5 (151.9) (76.2) (144.6) Interest cover (x) (5.2) Net cash inflow (outflow) 4, , , ,259.5 Beginning cash & cash 29, , , ,186.8 equivalent Changes due to forex impact Ending cash & cash equivalent 34, , , ,

7 COMPANY RESULTS Indocement TP (INTP IJ) 1Q17: Another Set Of Weak Results INTP posted another set of weak results in 1Q17. Net income fell 49% yoy with profitability contracting to a record low for the last decade. Higher energy prices have raised its costs while its pricing power remains weak due to soft demand in its home market. Maintain SELL and target price of Rp14,000. Despite weaker earnings momentum, INTP s current valuation premium over SMGR has widened significantly to 37% vs the historical average of only 14%. 1Q17 RESULTS Year to 31 Dec (Rpb) 1Q17 yoy % chg 1Q17 yoy % chg qoq % chg Revenue 3,376 (14.1) 3,376 (14.1) (15.9) Gross Profit 1,164 (31.5) 1,164 (31.5) (27.5) EBIT 500 (53.8) 500 (53.8) (41.6) Net Income 492 (48.7) 492 (48.7) (32.0) Margins (%) Remarks Gross Margin 34.5 (8.8) 34.5 (8.8) (5.5) Record low margins since the global financial crisis due to cost pressure and weak pricing power EBIT Margin 14.8 (12.7) 14.8 (12.7) (6.5) Net Margin 14.6 (9.8) 14.6 (9.8) (3.4) Operational Data Sales Vol. (m ton) 4.1 (0.0) 4.1 (0.0) (19.0) Boosted by domestic clinker sales ASP (Rp '000/ton) 829 (14.0) 829 (14.0) 3.8 COGS/ton (Rp '000) 543 (0.7) 543 (0.7) 13.3 Coal price hike started to affect cost Source: INTP, UOB Kay Hian RESULTS Weak 1Q17 results in line with our expectation. Indocement TP (INTP) posted another set of weak results in 1Q17. Revenue fell 14.1% yoy while net profit plunged 48.7% yoy to Rp492b. The results are in line with our expectations with revenue and net profit coming in at 21% and 15% of our full-year estimates respectively. On a qoq basis, revenue fell 16%, sales volume dropped 19% on seasonality while ASP inched up 3%. SELL (Maintained) Share Price Rp16,775 Target Price Rp14,000 Upside -16.5% COMPANY DESCRIPTION INTP manufactures and sells cement, ready-mix concrete and aggregates and andesite stone quarries. The company has 12 plants in Citeureup, Cirebon and South Kalimantan, with a total annual cement production capacity of 25m tonnes. STOCK DATA GICS sector Materials Bloomberg ticker: INTP IJ Shares issued (m): 3,681.2 Market cap (Rpb): 61,752.7 Market cap (US$m): 4, mth avg daily t'over (US$m): 1.8 Price Performance (%) 52-week high/low Rp19,375/Rp14,300 1mth 3mth 6mth 1yr YTD (9.7) 8.9 Major Shareholders % Birchwood Omnia Ltd 51.0 FY17 NAV/Share (Rp) 7,368 FY17 Net Cash/Share (Rp) 2,785 Record low margins over past decade. Gross and EBIT margins slid 880bp and 1270bp to 34.5% and 14.8% respectively. These margins are even lower than that during the global financial crisis in PRICE CHART (lcy) INDOCEMENT TUNGGAL PRAKARSA INDOCEMENT TUNGGAL PRAKARSA/JCI INDEX (%) KEY FINANCIALS Year to 31 Dec (Rpb) F 2018F 2019F Net turnover 17,798 15,362 16,330 18,126 19,880 EBITDA 5,881 4,540 4,549 5,088 5,954 Operating profit 5,029 3,618 3,591 4,029 4,838 Net profit (rep./act.) 4,357 3,871 3,272 3,607 4,250 Net profit (adj.) 4,357 3,871 3,272 3,607 4,250 EPS (Rp) 1, , ,154.6 PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (35.8) (36.6) (37.8) (33.9) (34.7) Interest cover (x) n.a. n.a. n.a. n.a. n.a. ROE (%) Consensus net profit - - 3,483 3,683 4,021 UOBKH/Consensus (x) Source: INTP, Bloomberg, UOB Kay Hian Volume (m) 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Adrianus Bias Prasuryo (62 21) adrianusbias@uobkayhian.com

8 Sales volume boosted by domestic clinker sales. INTP s sales volume was flat yoy at 4.1m tonne (-19% qoq), mainly boosted by sizeable domestic clinker sales which made the difference with the association sales data release of only 3.78m tonnes. INTP did this in order to optimise its utilisation rate despite it resulting in lower blended margins. STOCK IMPACT Cost pressure from energy price hike reflected in 1Q17. The full impact of rising coal prices was reflected in 1Q17 where fuel and power cost rose 3% yoy and 19% qoq to Rp236,700/tonne. Despite initiatives to raise efficiency and the commencement of the new P14 plant which has much lower production cost, INTP s COGS/tonne still rose 13% qoq. SEGMENTAL COST MOVEMENT SALES VOLUME & ASP ('000 tonne) 5,500 5,000 4,500 4,000 3,500 Q Source: INTP Q Q Q Sales Volume (LHS) Q Q Q COGS/TONNE & GROSS MARGIN Q ASP (RHS) Q , (Rp '000/tonne) 45% 40% 35% 30% 25% (Rp '000/tonne) 20% Q Q Q Q Q Q Q Q Q Q Source: INTP COGS/tonne (RHS) Gross Margin (LHS) Source: INTP PROFITABILITY EARNINGS REVISION/RISK 50% 40% We maintain our 2017 earnings forecast as 1Q17 results are in line with our expectation. 46% 42% 36% 32% VALUATION/RECOMMENDATION 38% 28% Maintain SELL and target price of Rp14,000, pegged at 15.7x 2017F PE, or -1SD historical average PE. INTP s valuation premium over SMGR has widened significantly to 37% vs the 3-year average of only 14%. We now prefer SMGR over INTP on the back of better earnings momentum, bigger exposure to the ex-java markets and much reasonable valuation. 34% 30% Source: INTP FORWARD PE (INTP VS SMGR) 24 60% (x) Gross Margin (LHS) EBITDA Margin (RHS) 24% 20% 20 40% 16 20% 12 0% 8 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17-20% Source: Bloomberg, UOB Kay Hian INTP's Premium INTP fwd-pe SMGR fwd-pe 8

9 PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Rpb) F 2018F 2019F Year to 31 Dec (Rpb) F 2018F 2019F Net turnover 15,362 16,330 18,126 19,880 Fixed assets 14,644 15,352 17,164 17,686 EBITDA 4,540 4,549 5,088 5,954 Other LT assets 1, Deprec. & amort ,059 1,116 Cash/ST investment 9,674 10,353 9,843 10,557 EBIT 3,618 3,591 4,029 4,838 Other current assets 4,751 4,589 5,088 5,524 Total other non-operating income Total assets 30,151 31,181 33,079 34,702 Associate contributions ST debt Net interest income/(expense) Other current liabilities 3,118 3,050 3,379 3,600 Pre-tax profit 4,146 4,249 4,684 5,520 LT debt Tax (275) (977) (1,077) (1,270) Other LT liabilities Minorities Shareholders' equity 26,139 27,123 28,750 30,124 Net profit 3,871 3,272 3,607 4,250 Minority interest Net profit (adj.) 3,871 3,272 3,607 4,250 Total liabilities & equity 30,151 31,181 33,079 34,703 CASH FLOW KEY METRICS Year to 31 Dec (Rpb) F 2018F 2019F Year to 31 Dec (%) F 2018F 2019F Operating 5,011 4,324 4,496 5,152 Profitability Pre-tax profit 4,146 4,249 4,684 5,520 EBITDA margin Tax (275) (977) (1,077) (1,270) Pre-tax margin Deprec. & amort ,059 1,116 Net margin Associates ROA Working capital changes (170) (214) ROE Other operating cashflows Investing (2,144) (1,471) (2,968) (1,590) Growth Capex (growth) (1,752) (1,667) (2,870) (1,639) Turnover (13.7) Others (392) 196 (98) 49 EBITDA (22.8) Financing (1,848) (2,174) (2,037) (2,848) Pre-tax profit (26.5) Dividend payments (1,528) (2,323) (1,963) (2,886) Net profit (11.1) (15.5) Issue of shares Net profit (adj.) (11.1) (15.5) Proceeds from borrowings (14) (5.0) 2.5 (1.2) EPS (11.1) (15.5) Others/interest paid (306) 153 (77) 38 Net cash inflow (outflow) 1, (510) 714 Leverage Beginning cash & cash equivalent 8,655 9,674 10,353 9,843 Debt to total capital Ending cash & cash equivalent 9,674 10,353 9,843 10,557 Debt to equity Net debt/(cash) to equity (36.6) (37.8) (33.9) (34.7) Interest cover (x) n.a. n.a. n.a. n.a. 9

10 SECTOR UPDATE Plantation Malaysia Apr 17: Inventory Inches Up, But Slightly Lower Than Market Expectation Malaysia s Apr 17 palm oil inventory continued to inch up to 1.60m tonnes, but this is slightly below the market s expectation. The increase was led by a production recovery mainly in Sabah. We expect supply to remain tight in the coming months, while a strong production recovery is expected in 2H17. The tight supply is evidenced by Apr 17 s production which is still below the Apr 15 level and higher future spot month CPO prices vs MPOB CPO prices. Maintain MARKET WEIGHT. MALAYSIA PALM OIL BOARD (MPOB) DATA SUMMARY mom yoy yoy (m tonne) Apr 17 % chg % chg 4M17 % chg CPO Production Pen Malaysia Sabah Sarawak 0.30 (1.1) Palm Oil Stocks (11.3) 1.60 (11.3) Palm Oil Domestic Use Palm Oil Exports Palm Oil Imports 0.05 (46.6) CPO Price (RM/tonne) 2,754 (6.8) 4.0 3, Source: MPOB, UOB Kay Hian WHAT S NEW Inventory increased for two consecutive months as production recovered. Based on the latest data released by the Malaysian Palm Oil Board (MPOB), Malaysia s palm oil inventory continued to improve for the second month to 1.60m tonnes in Apr 17, which is marginally lower than the market s expectation of 1.63m-1.65m tonnes. Despite the mom increase, inventory was still down by 11.3% yoy. We expect near-term supply to remain tight, while a strong production recovery will only take place in 2H17. Production recovery led to higher inventory level. CPO production for Apr 17 increased 5.7% mom and 19.0% yoy, largely led by the production recovery in Sabah, followed by Peninsular Malaysia. The CPO production recovery in Sabah came in slower compared to that in other states with Sabah s production picking up only in Mar-Apr 17 while the pick-up in other states took place in Jan-Feb 17 as Sabah suffered a longer period of dryness in Other the other hand, Sarawak s CPO production saw a marginal decline (-1.1% mom) in Apr 17 which could have been due to the high rainfall affecting harvesting activity. ACTION Maintain MARKET WEIGHT. We expect CPO prices to stay firm in 1H17 and weaken in 2H17 when production recovers and inventory starts to pile up. We expect CPO prices would average RM2,600/tonne for 2017 (2016: RM2,653) and RM2,500/tonne for We are reviewing our sector weighting on the back of: a) increase in palm oil supply in 2H17 on the back of the production recovery, b) demand being weaker than expected on less demand from Indonesia s biodiesel blending programme and stagnant demand from key importing countries such as China and India, and c) anticipation of ample soybean supply from the US. MARKET WEIGHT (Maintained) TOP PICKS Company Rec Share Price (RM) Target Price (RM) Kim Loong BUY Source: Bloomberg, UOB Kay Hian INVENTORY INCREASED TO 1.60M TONNES IN APR 17, MARGINALLY LOWER THAN MARKET EXPECTATIONS (m tonnes) Malaysian Palm Oil Inventory Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: MPOB PRODUCTION INCREASED MOM (m tonnes) Malaysian Monthly CPO Production Source: MPOB Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ANALYSTS Malaysia Research Team research@uobkayhian.com Ooi Mong Huey monghuey@uobkayhian.com PEER COMPARISON Company Ticker Rec Target Market PE Div 11 May 17 Price Cap F 2018F ROE P/B Div Yield (RM) (RM) (US$m) (x) (x) (x) (%) (x) (sen) (%) Kim Loong Resources KIML MK BUY KL Kepong KLK MK HOLD , Sime Darby SIME MK HOLD , Genting Plantations GENP MK HOLD , Sarawak Oil Palm SOP MK HOLD IJM Plantations IJMP MK HOLD IOI Corporation IOI MK SELL , TH Plantations THP MK SELL Felda Global FGV MK NR 1.90 NA 1, Source: Respective companies, Bloomberg, UOB Kay Hian 10

11 For Malaysian plantation companies under our coverage, we like Kim Loong (KIML/BUY/Target: RM4.20) as its earnings growth is supported by: a) the recovery in FFB production, b) good milling margins from the recovery in oil extraction rate, and c) extra income from value-add by-products. ESSENTIALS Expect supply to remain tight in the near term. CPO production is recovering gradually, with it having registered two consecutive months of mom increases in Mar-Apr 17. However, Apr 17 CPO production is still lower than Apr 15 s. Moreover, the tight supply situation is evidenced by higher future spot month CPO prices vs MPOB CPO prices (refer to the chart at RHS). On 9 May 17, future spot month CPO prices were RM53.50/tonne higher than MPOB CPO prices. Exports increased mom in Apr 17; expected to continue increasing in May 17. Exports increased marginally (+1.4% mom) in Apr 17 on the back of an increase in exports to China and the US. We expect palm oil demand to continue to increase in the coming months, especially from the Middle East and some African countries as they are preparing for Hari Raya Puasa which falls on Jun 17. According to cargo surveyor Intertek Testing Services, exports increased 12.9% mom to 346,920 tonnes from 1-10 May 17. National FFB yield continued to improve mom. National FFB yield continued to improve mom and was above the 5-year average in Apr 17 (refer to the chart at RHS). FFB yield is expected to continue to improve in the coming months as the lagged impact from the drought is weakening. Normalisation of FFB yield would most likely take place in 2H17. Indonesian inventory level still lower mom in Mar 17. According to data released by the Indonesian Palm Oil Association (GAPKI), Indonesia s inventory dropped to 1.398m tonnes in end-mar 17 as total exports and domestic consumption outweighed higher production. We expect Indonesia s FFB production trend in 2017 to be similar to 2016 s. Thus, production is likely to weaken in 2Q17 due to months of lagged impact from the El Nino, while we expect a strong production pick-up only in 4Q17. SECTOR CATALYSTS Weather disruption. Agricultural production is usually impacted by extreme weather. Any negative impact from the weather would be positive to prices. Demand from key importing countries picking up significantly. ASSUMPTION CHANGES No changes. RISKS Backtracking of biodiesel mandates in Indonesia and Malaysia. MALAYSIA PALM OIL EXPORTS ( 000 tonne) Apr 17 mom % chg yoy % chg 4M17 yoy % chg TOTAL 1, , China Pakistan (24.2) EU (7.8) India 161 (6.2) (10.4) 605 (36.2) US (23.7) Japan Others 694 (4.4) 8.9 2, Source: MPOB INDONESIA S PALM OIL INVENTORY LEVEL WAS LOWER IN MAR 17 AS TOTAL EXPORTS AND DOMESTIC CONSUMPTION OUTWEIGH HIGHER PRODUCTION ( 000 tonnes) Jan 17 Feb 17 Mar 17 mom % chg Opening stock 3,747 2,855 1,926 (32.5) Production 2,859 2,631 2, Export (CPO, Lauric Oil & Biodiesel) 2,838 2,655 2,526 (4.9) Domestic Consumption Ending stock 2,855 1,926 1,398 (27.4) Source: GAPKI EXPORTS IMPROVED MOM IN APR 17 (m tonnes) Malaysian Monthly Palm Oil Exports Source: MPOB Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HIGHER FUTURE SPOT MONTH CPO PRICES VS MPOB CPO PRICES (RM/tonne) Source: MPOB MPOB CPO Prices Future Spot Month CPO Prices Jan-17 Feb-17 Mar-17 Apr-17 May -17 NATIONAL FFB YIELD ABOVE 5-YEAR AVERAGE (tonne/ha) yrs Range yrs Average National FFB Yield Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: MPOB 2017 INDONESIA S PRODUCTION TREND IS EXPECTED TO BE SIMILAR TO 2016 S WHERE 2Q PRODUCTION COULD BE LOWER THAN 1Q S ('000tonnes) 10,000 *8 out of 11 companies FFB production is included in 1Q17 9,000 8,000 7,000 6,000 5,000 4,000 3,000 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Source: Respective companies 11

12 COMPANY RESULTS SP Setia (SPSB MK) 1Q17: Expect Stronger Quarters SP Setia reported 1Q17 net profit of RM105.2m, representing 13% of our full-year estimate. However, we deem the results in line as we expect subsequent quarterly performances to be strong as the group recognises about RM1.3b worth of property deliveries for its iconic London project. As of Apr 17, the group recorded RM801.0m in property sales, driven by its Klang Valley developments. Maintain HOLD with a target price of RM3.61. A good entry price would be RM Q17 RESULTS Year to 31 1Q17 4Q16 qoq chg yoy chg Dec (RMm) % % Revenue ,771.8 (46.9) 3.5 Construction (21.0) 58.8 Property development ,628.2 (49.9) 0.4 Others (5.9) COGS (680.1) (1,216.9) (44.1) 5.1 Gross Profit (53.1) (0.6) PBT (66.9) (10.2) Construction 6.2 (5.1) n.m Property development (72.0) 3.3 Others 1.7 (62.4) n.m. (94.6) Taxation (54.7) (64.6) (15.3) (0.5) PATAMI (75.2) (14.8) Margins (%) (%) +/- ppt +/- ppt PBT (11.2) (2.8) PBT - Property (16.1) 0.6 PATAMI (12.8) (2.4) Source: SP Setia Berhad, UOB Kay Hian RESULTS Within expectations. SP Setia s 1Q17 results were within expectations with net profit coming in at RM105.2m (-75.2% qoq, -14.8% yoy) on revenue of RM940.2m (-46.9% qoq, +3.5% yoy). PATAMI saw a 75% qoq and 15% yoy drop due to the lumpy recognition from its Australian and London developments in the last year s corresponding quarters. While 1Q17 net profit accounts for only 13.1% and 14.2% of our and consensus full-year estimates, we deem the results in line as we expect for the group to progressively recognise revenues from the remaining units at Phase 1 of the Battersea Power Station development. KEY FINANCIALS Year to 31 Dec (RMm) F 2018F 2019F Net turnover 6,746 4,957 5,407 4,877 5,082 EBITDA 924 1,441 1, Operating profit 891 1,389 1, Net profit (rep./act.) 583 1, Net profit (adj.) 583 1, EPS (sen) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) n.a. n.a. n.a. n.a. n.a. ROE (%) Consensus net profit UOBKH/Consensus (x) Source: SP Setia Berhad, Bloomberg, UOB Kay Hian n.m. : not meaningful; negative P/E, EV/EBITDA reflected as "n.m." HOLD (Maintained) Share Price Target Price RM3.68 RM3.61 Upside -1.9% COMPANY DESCRIPTION SP Setia is one of the leading property developer in Malaysia with vast landbanks in Klang Valley, Penang and Iskandar. STOCK DATA GICS sector Real Estate Bloomberg ticker: SPSB MK Shares issued (m): 2,854.3 Market cap (RMm): 10,503.7 Market cap (US$m): 2, mth avg daily t'over (US$m): 2.7 Price Performance (%) 52-week high/low RM3.70/RM2.82 1mth 3mth 6mth 1yr YTD Major Shareholders % PNB 51.0 Skim Amanah Saham Bumiputera 15.0 Kumpulan Wang Persaraan 9.4 FY17 NAV/Share (RM) 3.23 FY17 Net Debt/Share (RM) 0.55 PRICE CHART (lcy) SP SETIA BHD SP SETIA BHD/FBMKLCI INDEX May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Volume (m) Ridhwan Effendy ridhwaneffendy@uobkayhian.com (%)

13 Pre-tax margin within expectations. SP Setia s pre-tax margin stood at 18.6% (- 11.2ppt qoq, -2.8ppt yoy). The volatility in margin was due to a change in product mix during the quarter. We expect pre-tax margin to range within 16-20% in subsequent quarters. RM1.3b worth of Battersea Power Station revenue to be recognised this year. This year, the group expects to handover about 640 properties for Phase 1 of its Battersea Power Station development which has a total effective GDV of RM1.4b. To-date, the group has handed over about 223 units of apartments for Phase 1. STOCK IMPACT RM426.8m in sales recorded in 1Q17. The group managed to rake in property sales of RM426.8m in 1Q17. Including sales in Apr 17, the group has secured about RM801m of sales in 4M17, 20% of its 2017 target of RM4b. The key sales growth driver was its flagship development, Setia Alam, which contributed about RM106m in sales, mainly involving mid-range terrace houses and affordable apartments. Geographically, about 58% of the sales came from the Klang Valley developments, 19% from the Southern region and the remaining from the Northern and International regions. Aside from that, the recently-launched TRIO by Setia (GDV: RM214m) at Bukit Tinggi witnessed a commendable take-up rate of approximately 60% in April. About RM3.2b worth of properties lined up for launch for the rest of the year. Among notable developments earmarked for launch would be the final tower at Setia Sky Seputeh (GDV: RM478m), a development on Exhibition Street in Melbourne (GDV: AUD478m), KL Eco City (GDV: RM615m) and Setia Seraya Residences (RM278m). Unbilled sales of RM7.8b to ensure steady earnings visibility. Unbilled sales of RM7.8b (1.7x 2016 property development revenue) as of Mar 17 should cushion earnings visibility for the next two years. About 48% are from overseas projects (Battersea Power Station accounts for 46% of total unbilled sales) and the remaining from local townships and mixed developments. Revenue from overseas projects would be recognised upon progressive deliveries in EARNINGS REVISION/RISK No change to earnings estimates. RNAV (RMm) NPV of Development Profits 6,175 Central Region 3,411 Northern Region 338 Southern Region 532 Eastern Region 126 Battersea Power Station 933 Vietnam, China & Others 835 Shareholders Funds 9,201 RNAV 15,376 Existing Sharebase (m) 2,628 i-rcps 351 Enlarged sharebase (m) 2,979 RNAV/share (RM) 5.16 Discount (%) 30% Target Price (RM) 3.61 Source: UOB Kay Hian SALES BREAKDOWN Region Value (RMm) Local Central 250 Southern 80 Northern 22 Eastern (Sabah) - Total 352 International Battersea 48 Carnegie Melbourne 2 Others 26 Total 76 Grand Total 428 Source: SP Setia, UOB Kay Hian Key risks include: a) execution risks, b) rising interest rates, c) tighter lending policies by banks, and d) rising cost of raw materials that will lead to margin erosion. VALUATION/RECOMMENDATION Maintain HOLD and target price of RM3.61. Our target price is based on a 30% discount to our RM5.16 RNAV/share and implies 13x 2017F PE. The stock offers a dividend yield of about 5.4%, driven by chunky earnings recognition from its overseas projects. While the company s fundamentals remain intact, persistent sector headwinds may cap valuations. Entry price is RM3.20. SHARE PRICE CATALYST Announcement of I&P sale and purchase agreement (SPA). Strong property sales. 13

14 PROFIT & LOSS Year to 31 Dec (RMm) F 2018F 2019F Net turnover 4,957 5,407 4,877 5,082 EBITDA 1,441 1, Deprec. & amort EBIT 1,389 1, Associate contributions Net interest income/(expense) Pre-tax profit 1,547 1, Tax (285) (254) (180) (220) Minorities (91) Net profit 1, Net profit (adj.) 1, BALANCE SHEET Year to 31 Dec (RMm) F 2018F 2019F Fixed assets Other LT assets 8,572 8,827 9,027 9,227 Cash/ST investment 4,170 4,169 4,131 4,152 Other current assets 5,676 5,842 5,943 6,339 Total assets 18,690 19,061 19,283 19,867 ST debt 1,974 1,974 1,974 1,974 Other current liabilities 2,568 2,527 2,458 2,685 LT debt 3,839 3,839 3,839 3,839 Other LT liabilities Shareholders' equity 9,811 10,223 10,515 10,872 Minority interest Total liabilities & equity 18,690 19,061 19,283 19,867 CASH FLOW Year to 31 Dec (RMm) F 2018F 2019F Operating Pre-tax profit 1,547 1, Tax (443) (254) (180) (220) Deprec. & amort Associates (734) Working capital changes (21) (253) (253) (253) Other operating cashflows Investing (1,689) (199) (199) (199) Capex (growth) (49) (200) (200) (200) Investments (734) Proceeds from sale of assets Others (907) Financing 1,657 (582) (468) (529) Dividend payments (40) (392) (278) (339) Issue of shares Proceeds from borrowings n.a. n.a. n.a. n.a. Loan repayment (1,966) (190) (190) (190) Others/interest paid 3, Net cash inflow (outflow) (38) 20 Beginning cash & cash equivalent 3,659 4,076 4,169 4,131 Changes due to forex impact Ending cash & cash equivalent 4,076 4,169 4,131 4,152 KEY METRICS Year to 31 Dec (%) F 2018F 2019F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover (26.5) 9.1 (9.8) 4.2 EBITDA 55.9 (25.1) (29.5) 20.8 Pre-tax profit 54.9 (31.6) (29.1) 22.0 Net profit (31.3) (29.1) 22.0 Net profit (adj.) (31.3) (29.1) 22.0 EPS 79.0 (39.4) (29.1) 22.0 Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x) n.a. n.a. n.a. n.a. 14

15 COMPANY RESULTS City Developments (CIT SP) 1Q17: Downgrade To HOLD Post Strong Share Price Performance Downgrade to HOLD on valuation grounds post 31% ytd jump in share price with an unchanged target price of S$11.40 (pegged to 12% discount to RNAV). Management struck a more upbeat tone on the Singapore residential segment, even joining in the recent GLS bidding fray on the back of a strong pick-up in homebuying activity (89% yoy in 1Q17) despite the 14th consecutive quarterly decline in home prices. Entry price is S$ Q17 RESULTS yoy Year to 31 Dec (S$m) 1Q17 % chg Remarks Turnover Progressive handover at Suzhou Hong Leong City Gross Profit Centre (HLCC) and robust take-up at Gramercy Park. Pre-tax Profit (17.0) Tax (15.6) 7.8 Net Profit 85.5 (18.9) Fully diluted EPS (cent) 9.0 (18.2) Gross Margin (%) 46.7 PBT by yoy Business Segment 1Q17 % chg Remarks Property Development Hotel Operations 4.8 (55.6) Forex losses, dismal US, Singapore, Asia performance Rental Properties 28.4 (31.3) Divestment of Exchange Tower Others (0.3) nm Source: CDL, UOB Kay Hian RESULTS Results below our and consensus expectations. 1Q17 net profit of S$243.8m was down 40.6% yoy, due to an absence of profits from completed JV projects Bartley Ridge and Echelon, lacklustre hospitality division, as well as forex losses, 1Q17 gross revenue was up 36.5% yoy, driven by maiden contributions from Suzhou Hong Leong City Centre (HLCC) in China, and steady sales of Singapore projects. The results came in below our and consensus expectations, with 1Q17 net profit accounting for 15% of our full-year forecast, on lower-than-expected earnings contribution from the hospitality and rental property business segments. Segmental performance. 1Q17 property development PBT was up 14.9% yoy mainly due to maiden contributions from the abovementioned HLCC and sales of Gramercy Park, CocoPalms, and The Venue Residences. 1Q17 saw hotel operations PBT decline 55.6% yoy, mainly from weakness in New York and Singapore and the rest of Asia (supply-side pressure and tepid corporate demand), combined with a weaker GBP (main contributor Millennium and Copthorne reports in GBP). During the quarter, rental property PBT declined 31.3% yoy, largely attributable to the loss of contribution from the divestment of Exchange Tower (announced in 4Q16). KEY FINANCIALS Year to 31 Dec (S$m) F 2018F 2019F Net turnover 3,304 3,905 3,721 3,595 4,108 EBITDA 1,165 1,146 1,263 1,285 1,367 Operating profit ,044 1,064 1,144 Net profit (rep./act.) Net profit (adj.) EPS (cent) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (15.9) Interest cover (x) ROE (%) Consensus net profit UOBKH/Consensus (x) Source: Bloomberg, UOB Kay Hian HOLD (Downgraded) Share Price S$10.85 Target Price S$11.40 Upside +5.1% COMPANY DESCRIPTION City Developments is an international property and hotel conglomerate involved in real estate development and investment, hotel ownership and management, as well as the provision of hospitality solutions. STOCK DATA GICS sector Real Estate Bloomberg ticker: CIT SP Shares issued (m): Market cap (S$m): 9,865.9 Market cap (US$m): 7, mth avg daily t'over (US$m): 14.8 Price Performance (%) 52-week high/low S$10.89/S$7.97 1mth 3mth 6mth 1yr YTD Major Shareholders % Kwek Hldgs 48.4 FY17 NAV/Share (S$) FY17 Net Debt/Share (S$) 2.00 PRICE CHART (lcy) CITY DEVELOPMENTS LTD CITY DEVELOPMENTS LTD/FSSTI INDEX (%) Volume (m) 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Vikrant Pandey vikrant@uobkayhian.com Derek Chang derekchang@uobkayhian.com

16 STOCK IMPACT Singapore projects saw fairly healthy takeup, with 293 units sold in 1Q17, bolstered by chart topper Forest Woods (82% units sold to date). Management expects earnings contributions from this project over the course of About 52% of 174-unit Gramercy Park was sold as of 7 May, as well as ~87% in take-up of 638-unit The Brownstone (launched Jul 15). Upbeat tone on Singapore residential outlook, even joining in the recent GLS bidding fray. CDL noted that despite the 14 th consecutive decline in the URA price index, 1Q17 saw increased momentum, with home sales volume up 83% yoy. Spurred by the improved home-buying sentiment, it intends to launch 124-unit New Futura in 2H17. We also note that CDL recently put in a winning bid of S$370.1m (S$565 psf ppr) at Tampines Ave 10 (Government Land Sales site) in May, with an 800-unit project intended for the site. The bid price was 17.2% higher than neighbouring land parcel acquired by MCC Land in May 15 (S$483 psf ppr). We reckon the bid was marginally aggressive, as estimated selling prices (~S$1,100psf) come above ASPs at neighbouring projects The Alps Residences (S$1,073 psf) and The Santorini (S$1,035 psf). Asset enhancement initiatives. CDL is reviewing AEI opportunities for its office portfolio (Republic Plaza), as the office leasing market currently still favours tenants. On the residential front, CDL intends to sink in S$30m to refurbish Le Grove Serviced Apartments, increasing the number of units from 97 to 137 (expected completion: 2Q18). Overseas projects update. China contributions were bolstered by income recognition from recently completed Phase 1 of Suzhou Hong Leong City Center (1,374 units from Tower 1 & 3), which is now 77% sold for about Rmb2.3 to date. Phase 2 is expected to complete by 2Q18. Recently launched 126-unit Eling Residences in Chongqing did not sell any units in 1Q17, with management previously flagging cooling measures as a key drag. Management maintains a positive long-term view on these cities despite multiple tightening measures for the property market across China. In the UK, the initial launch of 57 units at 220-unit Teddington Riverside will be delayed till 3Q17 (after UK elections). Planning consent was obtained for CDL s 200m 34-unit luxury care home development, with demolition to commence in 3Q17. The recently-announced GBP58m acquisition of the Ransomes Wharf site (estimated GDV of GBP222m) will begin demolition in 3Q17. Lukewarm hospitality outlook. We expect Singapore operations to continue seeing weak corporate demand coupled with supply indigestion (+5.9% expansion in room supply expected for 2017). However, London could continue to be a beneficiary of the weaker GBP in the wake of 23 June s Brexit referendum, seeing higher in-bound tourists (which will be partially offset by weaker corporate demand). Management had previously asserted that it would implement strategy revision with interim CEO Tan Kian Seng. Group RevPAR grew 4.7% for the first 3 weeks of Apr 17, in constant currency terms, bolstered by Australasia (+24.1%), New York (+19.9%) and London (+17.1%). This was partially offset by Singapore, which saw RevPAR decline 10.8%. Management attributed the dismal performance in Singapore to the confluence of supply-side pressure on room rates and lower corporate demand. In addition to its focus on under-performing Singapore and Rest of Asia portfolio, the US management structure will also be reviewed. South Beach updates. The entire mixed project obtained final TOP in Dec 16. Both the office and retail components are 100% leased. Rebranded JW Marriot Hotel Singapore South Beach soft opened in Mar 17, with business activity picking up. South Beach Residences has not yet been launched, with management considering rental options. Diversification objectives. CDL has earmarked S$5b in acquisitions by 2018, with about S$2.5b achieved thus far. These include venture capital investments in online apartment rental platform mamahome (Rmb100m) and co-working space provider Distrii (Rmb72m) as well as acquisitions of investment property in Japan and the UK. CDL is also on track to reach the target S$5b in AUM from the PPS programme by 2018 (currently S$3.5b). Management has not ruled out a fourth PPS later this year. VALUATION/RECOMMENDATION Downgrade to HOLD with an unchanged target price of S$11.40 pegged at a 12% discount to our RNAV of S$12.95/share. We downgrade the stock on valuation grounds post the 31% ytd jump in the share price. SHARE PRICE CATALYST Relaxation of property measures in Singapore and substantial overseas acquisitions. RNAV (S$m) Total Investment Properties 11,318.5 Book value of Investment Properties 10,081.8 Surplus/ (deficit) to book (1) 1,622.4 NPV of Development Profits (2) 1,505.0 NPV of Commercial development (3) 53.3 Surplus/(Deficit) from Listed entities (4) 4.2 Net Book Value (5) 8,995.8 RNAV ( ) 12,355.3 Fully diluted no. of shares(m) Fully diluted RNAV per share (S$) Source: CDL, UOB Kay Hian SINGAPORE RESIDENTIAL INVENTORY Source: CDL 52% OF 1Q17 EBITDA FROM RECURRING INCOME Source: CDL PBT BY SEGMENT Source: CDL 16

17 PROFIT & LOSS BALANCE SHEET Year to 31 Dec (S$m) F 2018F 2019F Year to 31 Dec (S$m) F 2018F 2019F Net turnover 3, , , ,108.4 Fixed assets 5, , , ,472.1 EBITDA 1, , , ,367.1 Other LT assets 4, , , ,218.7 Deprec. & amort Cash/ST investment 3, , , ,591.6 EBIT , , ,143.7 Other current assets 6, , , ,839.1 Total other non-operating income Total assets 19, , , ,121.5 Associate contributions ST debt 1, , , ,110.7 Net interest income/(expense) (80.1) (121.2) (117.6) (109.0) Other current liabilities 1, , , ,884.0 Pre-tax profit ,059.4 LT debt 3, , , ,772.0 Tax (151.4) (156.9) (160.9) (175.9) Other LT liabilities Minorities (109.3) (234.3) (239.6) (262.3) Shareholders' equity 9, , , ,721.5 Preferred dividends Minority interest 2, , , ,851.1 Net profit Total liabilities & equity 19, , , ,121.5 Net profit (adj.) CASH FLOW KEY METRICS Year to 31 Dec (S$m) F 2018F 2019F Year to 31 Dec (%) F 2018F 2019F Operating 1, , ,515.2 Profitability Pre-tax profit ,059.4 EBITDA margin Tax (151.4) (156.9) (160.9) (175.9) Pre-tax margin Deprec. & amort Net margin Associates (70.5) (43.2) (34.8) (24.6) ROA Working capital changes (350.5) ROE Non-cash items Other operating cashflows (678.9) Growth Investing Turnover 18.2 (4.7) (3.4) 14.3 Capex (growth) EBITDA (1.7) Capex (maintenance) Pre-tax profit (7.2) Investments Net profit (15.5) (12.0) Proceeds from sale of assets Net profit (adj.) (15.5) (12.0) Others (70.3) EPS (15.5) (12.0) Financing (1,341.2) (182.2) (184.7) (187.2) Dividend payments (116.4) (116.4) (116.4) (116.4) Leverage Issue of shares Debt to total capital Proceeds from borrowings Debt to equity Loan repayment Net debt/(cash) to equity (15.9) Others/interest paid (1,324.8) (165.8) (168.3) (170.8) Interest cover (x) Net cash inflow (outflow) , , ,862.6 Beginning cash & cash equivalent 3, , , ,729.0 Changes due to forex impact (6.6) Ending cash & cash equivalent 3, , , ,

18 COMPANY RESULTS First Resources (FR SP) 1Q17: Strong Performance, Supported By Better CPO Prices FR reported core net profit of US$46m in 1Q17, slightly above our expectation, mainly attributed to stronger-than-expected realised palm kernel (PK) prices and higher CPO sales volume from an inventory drawdown. The strong qoq and yoy performances were due to higher CPO and PK prices. We maintain our earnings estimates as we expect weaker earnings in the coming quarters due to weakening CPO prices. Maintain BUY. Target price: S$ Q17 RESULTS Year to 31 Dec 1Q16 4Q16 1Q17 qoq yoy Remarks (US$m) % chg % chg Revenue Higher qoq due to higher CPO and PK prices; higher yoy on higher production and significant increase in prices - Plantation and Palm (18.0) 56.0 Oil Mills - Refinery and Processing EBITDA (4.2) > Plantation and Palm Oil Mills (29.1) >100.0 Weaker qoq due to decline in production on seasonality - Refinery and 3.1 (8.1) 7.3 n.m. >100.0 Processing EBIT (26.7) >100.0 PBT (16.1) >100.0 Net Profit (16.5) >100.0 Core Net Profit (4.4) >100.0 Above expectations as stronger realised PK prices and higher sales volume from an inventory drawdown Source: First Resources, UOB Kay Hian RESULTS Strong 1Q17 results, slightly above expectations. First Resources (FR) reported core net profit of US$46m (-4.4% qoq, +>100% yoy) in 1Q17, slightly above our expectation of US$42m. The positive variance was mainly attributed to stronger realised palm kernel (PK) prices and higher sales volume from an inventory drawdown. 1Q17 core net profit accounts for 32% of our 2017 forecast. KEY FINANCIALS Year to 31 Dec (US$m) F 2018F 2019F Net turnover EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (US cent) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit UOBKH/Consensus (x) Source: FR, Bloomberg, UOB Kay Hian BUY (Maintained) Share Price Target Price S$1.96 S$2.15 Upside +9.7% COMPANY DESCRIPTION Oil palm plantation with more than 100,000ha of planted areas, as well as refinery and biodiesel operations in Indonesia. STOCK DATA GICS sector Consumer Staples Bloomberg ticker: FR SP Shares issued (m): 1,584.1 Market cap (S$m): 3,104.8 Market cap (US$m): 2, mth avg daily t'over (US$m): 3.0 Price Performance (%) 52-week high/low S$2.01/S$1.51 1mth 3mth 6mth 1yr YTD 2.9 (0.5) Major Shareholders % Eight Capital 63.2 FY17 NAV/Share (US$) 0.61 FY17 Net Debt/Share (US$) 0.17 PRICE CHART (lcy) FIRST RESOURCES LTD FIRST RESOURCES LTD/FSSTI INDEX 10 5 Volume (m) 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Ooi Mong Huey monghuey@uobkayhian.com Singapore Research Team research@uobkayhian.com (%)

19 Strongest 1Q in past three years. The significant yoy improvement in 1Q17 net profit was mainly supported by higher production and the jump in CPO prices. The marginal qoq drop was mainly due to weaker production on seasonality despite better CPO prices. Plantation. The division reported a >100% yoy surge in EBITDA (-29.1% qoq), mainly due to higher selling prices and higher sales volume. CPO ASP jumped 33.6% yoy (+1.0% qoq) and sales volume rose 8.5% yoy on the back of a recovery in CPO production. Refinery and processing. The division registered qoq and yoy increases in EBITDA on better EBITDA margin of US$37/tonne in 1Q17 (4Q16: negative margins, 1Q16: US$16/tonne). The improved margins were partly due to the timely purchases of raw materials, sales of refined products and product mix, including the sales RBD olein, palm kernel oil and palm kernel expeller. STOCK IMPACT Maintain FFB production growth of 18% yoy for We are maintaining our FFB production growth of 18% yoy for 2017, mainly supported by a yield recovery and new areas coming into maturity. There will be 17,000ha of new areas coming into maturity in 2017 (10.7% of 2016 mature area), which should provide about 3% FFB production growth for Our forecast is higher than management s guidance of 15% yoy. We deem management s guidance very conservative, given that West Kalimantan s production is expected to show good FFB yield (less impacted by the 2015 El Nino and have younger trees). EARNINGS REVISION/RISK Maintain net profit forecasts. We forecast EPS of 9.1 US cents, 9.5 US cents and 9.9 US cents for respectively. We are maintaining our earnings forecasts as we expect weaker earnings in the coming quarters due to weakening CPO prices despite a production recovery. We also await outlook guidance from management during the conference call. VALUATION/RECOMMENDATION Maintain BUY and target price of S$2.15, based on 17x 2017F PE, or its 5-year mean PE. SHARE PRICE CATALYST Better-than-expected CPO prices. FR s earnings are still largely contributed by upstream operation, making its earnings highly sensitive to CPO prices. Any increase in CPO selling prices from our base case of RM2,600/tonne would be positive to earnings. Stronger-than-expected FFB production. Stronger-than-expected production recovery will positively contribute to FR s earnings. KEY STATISTICS Productivity 1Q16 4Q16 1Q17 qoq % chg yoy % chg FFB Yield/Ha (25.9) 29.0 OER (%) (2.6) Production ( 000 tonnes) Total FFB production (18.2) 43.7 Nucleus (18.5) 42.2 Plasma (15.8) 56.4 External crop (41.2) (6.1) CPO (21.6) 33.9 ASP (US$/tonne) CPO Palm Kernel Sales Volume ('000 tonnes) CPO (22.2) 8.5 PK (17.9) 17.1 Refined products (13.3) 2.1 EBITDA Margin (US$/tonne) - Plantation and Palm Oil Mills (8.8) > Refinery and Processing 16 (35) 37 n.m. >100.0 Source: FR 1Q17 EBITDA BY SEGMENT Source: FR Plantation and Palm Oil Mills 98% Refinery and Processing 2% EXPECT STRONG FFB PRODUCTION IN 2H17, SIMILAR TO 2016 S PRODUCTION TREND ('000tonne) Source: FR 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 BETTER REFINING & PROCESING EBITDA MARGINS QOQ AND YOY (US$/tonne) (50) 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 (100) Source: FR BETTER CPO PRICES QOQ AND YOY IN 1Q17 (US$/tonne) Source: FR, Reuters CPO Selling Price FR CPO ASP Dumai CPO Net ASP 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 19

20 PROFIT & LOSS Year to 31 Dec (US$m) F 2018F 2019F Net turnover EBITDA Deprec. & amort EBIT Total other non-operating income Net interest income/(expense) (24) (21) (23) (24) Pre-tax profit Tax (51) (50) (52) (55) Minorities (6) (6) (6) (7) Net profit Net profit (adj.) BALANCE SHEET Year to 31 Dec (US$m) F 2018F 2019F Fixed assets Other LT assets ,066 1,140 Cash/ST investment Other current assets Total assets 1,700 1,784 1,891 2,008 ST debt Other current liabilities LT debt Other LT liabilities Shareholders' equity ,052 1,143 Minority interest Total liabilities & equity 1,700 1,784 1,891 2,008 CASH FLOW Year to 31 Dec (US$m) F 2018F 2019F Operating Pre-tax profit Tax (49) (50) (52) (55) Deprec. & amort Working capital changes 12 (90) (27) (16) Other operating cashflows (16) (21) (23) (24) Investing (81) (113) (113) (113) Capex (growth) (28) (60) (60) (60) Investments Proceeds from sale of assets Others (53) (53) (53) (53) Financing (60) (26) (26) (26) Dividend payments (23) (43) (45) (47) Issue of shares Proceeds from borrowings Loan repayment (28) Others/interest paid (9) (9) (9) (9) Net cash inflow (outflow) 46 (50) Beginning cash & cash equivalent Changes due to forex impact Ending cash & cash equivalent KEY METRICS Year to 31 Dec (%) F 2018F 2019F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) (2.0) EPS (2.1) Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

21 COMPANY RESULTS Wilmar International (WIL SP) 1Q17: Strong Results On Better Performance From Oilseeds And Grains Wilmar s 1Q17 core net profit of US$313m was above expectations on stronger-thanexpected soybean crushed volume and margins, and better associates performance. We maintain our earnings forecasts but expect weaker soybean crushing margins in 2Q17. Management made a surprise announcement to restructure its China operations with the possibility of a separate listing. Maintain HOLD. Target price: S$3.50. Entry price: S$ Q17 RESULTS Year to 31 Dec 1Q16 4Q16 1Q17 qoq % yoy % Remarks Dec (US$m) chg chg Turnover 9,003 11,947 10,570 (11.5) 17.4 Higher yoy, supported by higher commodities prices PBT (21.8) 45.4 Tropical Oils (3.1) 19.6 Supported by better performances from refinery and upstream businesses Oilseeds and Grains Supported by higher soybean crushed volume and stable margins despite weaker consumer products sales volume Sugar (18) 136 (34) n.m. n.m. Due to seasonal maintenance in 1H17 for milling business and weaker downstream performance. Net Profit (35.5) 51.0 Mainly due to gains from investment securities Core Net Profit (47.0) 40.5 Above expectations; higher-than-expected soybean crushed volume and margins Source: Wilmar International, UOB Kay Hian RESULTS Results above expectations. Wilmar International (Wilmar) reported 1Q17 core net core profit of US$313m (-47.0% qoq, +40.5% yoy), coming in above our expectation of US$230m-270m. The variance is mainly due to stronger-than-expected soybean crushed volume and margins, higher contributions from China associates and no losses from its sugar associate in India. HOLD (Maintained) Share Price Target Price S$3.43 S$3.50 Upside +2.0% COMPANY DESCRIPTION Agribusiness group - oil palm cultivation, oilseeds crushing, palm & lauric refining, consumer pack edible oil processing and merchandising and sugar milling & refining. STOCK DATA GICS sector Consumer Staples Bloomberg ticker: WIL SP Shares issued (m): 6,321.3 Market cap (S$m): 21,682.0 Market cap (US$m): 15, mth avg daily t'over (US$m): 17.8 Price Performance (%) 52-week high/low S$3.98/S$3.03 1mth 3mth 6mth 1yr YTD (1.7) (12.7) (4.5) Major Shareholders % Archer Daniels Midland 23.9 Kuok Brothers 18.6 Kuok Khoon Hong 12.1 FY17 NAV/Share (US$) 2.36 FY17 Net Debt/Share (US$) 2.13 The higher net profit (unadjusted) of US$362m in 1Q17 was mainly attributed to gains from investment securities due to improved conditions in the equities markets. Share price could react positively to the potential listing of Wilmar s China operation, which is likely to command a higher PE valuation (average of 20-25x 17F PE) vs Wilmar s current 12x 2017F PE. PRICE CHART (lcy) WILMAR INTERNATIONAL LTD WILMAR INTERNATIONAL LTD/FSSTI INDEX (%) KEY FINANCIALS Year to 31 Dec (US$m) F 2018F 2019F Net turnover 38,777 41,402 44,727 49,999 56,317 EBITDA 1,973 2,080 2,593 2,680 2,791 Operating profit 1,248 1,316 1,794 1,860 1,953 Net profit (rep./act.) 1, ,318 1,380 1,456 Net profit (adj.) 1, ,318 1,380 1,456 EPS (US cent) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) n.a ROE (%) Consensus net profit - - 1,260 1,340 1,388 UOBKH/Consensus (x) Source: Wilmar, Bloomberg, UOB Kay Hian Volume (m) 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Singapore Research Team research@uobkayhian.com

22 Tropical Oils: Better yoy on higher production and better CPO prices. Segment performance came in within expectation, where PBT decreased marginally qoq due to weaker production on seasonality. Meanwhile, PBT registered a strong yoy growth, supported by better performances from the refinery (better margins on higher utilisation) and upstream businesses, with the latter benefitting from higher CPO prices and FFB production. Oilseeds & Grains: Stronger-than-expected soybean crushed volume and crushing margins. The division posted stronger-than-expected results. PBT increased 20.1% qoq, mainly supported by higher soybean crushed volume and better crushing margins despite weaker consumer products sales volume. PBT margin improved to 4.8% in 1Q17 (4Q16: 3.9%. 1Q16: 3.8%). Soybean crushing margins are expected to be capped by massive soybean imports into China in the coming months. Meanwhile, sales volume for consumer products is expected to recover in 2Q17 on the seasonal reduction in 1Q17, which will provide stable earnings to the group. Sugar: Seasonal loss. Segment performance was within expectation, with a pre-tax loss of US$35m (1Q16: Pre-tax loss of US$18m). The weaker yoy earnings were mainly due to higher operating costs despite higher sales volume (+27.3% yoy) which led to higher revenue (+60.5% yoy). We expect this division to continue showing a steady performance in 2017, supported by stable sales volume in the merchandising & processing segment. STOCK IMPACT Potential separate listing of China operations. Wilmar is restructuring its China operations (soybean crushing, consumer packs, flour and rice) with the possibility of a separate listing. However, the proposed listing is still at an evaluation stage. Our current SOTP-based target price is pegging the China operations (oilseeds & grains) at 15x 2017F PE vs an average of 29x 2017F PE trading PE for Tingyi (322 HK) and Uni- President (220 HK). Assuming the listing is at 20x 2017F PE and 25x 2017F PE, the potential enhancement to our target price will be S$ and S$ respectively. Back in mid-09, Wilmar also made an announcement to evaluate the feasibility of listing its China operations on the Shanghai or Hong Kong Stock Exchange. However, the plan was put on hold given the weak market sentiment then. EARNINGS REVISION/RISK No change to our earnings forecasts. We maintain our EPS forecasts of 20.6 US cents, 21.6 US cents and 22.7 US cents for respectively. We are maintaining our earnings forecasts as: a) we expect a weaker contribution from the oilseeds and grains business in 2Q17 on potential weaker soybean crushing margins, and b) awaiting the outlook guidance from management at the results briefing. VALUATION/RECOMMENDATION Maintain HOLD and SOTP-based target price of S$3.50. This translates into 12.1x blended 2017F PE, which is close to its 5-year mean (1-year forward PE of 12.5x). Entry price is S$3.20. SHARE PRICE CATALYST Stronger-than-expected earnings growth. Weather-induced commodity price hikes. Full implementation of the biodiesel mandates globally could lead to better demand for biodiesel (Wilmar is the world s largest palm biodiesel producer). SEGMENTAL SALES VOLUME BREAKDOWN Year to 31 Dec 1Q16 4Q16 1Q17 qoq % chg yoy % chg Sales Volume ('000 tonnes) Tropical Oils - Manufacturing 5,557 6,111 5,650 (7.5) 1.7 Oilseeds and Grains 7,185 7,485 7,118 (4.9) (0.9) - Manufacturing 5,462 6,117 5,696 (6.9) Consumer Products 1,723 1,368 1, (17.5) Sugar 1,955 5,008 2,488 (50.3) Milling 88 1, (87.3) > Merchandising & Processing 1,867 3,412 2,285 (33.0) 22.4 Source: Wilmar PRE-TAX PROFIT BREAKDOWN (US$m) (50) Source: Wilmar Tropical Oils Oilseeds and Grains Sugar (18.2) (34.5) 1Q16 1Q17 STRONG SUGAR SALES VOLUME YOY ('000 tonnes) 6,000 5,000 4,000 3,000 2,000 1,000 - Source: Wilmar Sugar sales volume 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 STRONG OILSEEDS & GRAINS MANUFACTURING SALES VOLUME UP YOY ('000 tonnes) 7,000 6,000 5,000 4,000 3,000 Source: Wilmar Oilseeds & Grains Division - Manufacturing Sales Volume 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 PLANTATION OPERATIONAL STATISTICS 1Q17 qoq % chg yoy % chg FFB production 938,771 (22.3) 4.1 (tonnes) Crude palm oil 393,696 (27.9) 4.7 (tonnes) FFB Yield 4.6 (24.6) 7.0 (tonnes/ha) Oil extraction rate (3.8) (%) Source: Wilmar SOTP VALUATION Division PE (x) (US$/share) Tropical Oils Oilseeds & Grains Sugar Others Fair Value (US$/share) 2.50 S$/US$ 1.40 Fair Value (S$/share) 3.50 Source: UOB Kay Hian 22

23 PROFIT & LOSS Year to 31 Dec (US$m) F 2018F 2019F Net turnover 41,402 44,727 49,999 56,317 EBITDA 2,080 2,593 2,680 2,791 Deprec. & amort EBIT 1,316 1,794 1,860 1,953 Total other non-operating income Associate contributions Net interest income/(expense) (157) (158) (154) (153) Pre-tax profit 1,300 1,791 1,869 1,971 Tax (206) (376) (392) (414) Minorities (121) (96) (96) (101) Net profit 972 1,318 1,380 1,456 Net profit (adj.) 972 1,318 1,380 1,456 BALANCE SHEET Year to 31 Dec (US$m) F 2018F 2019F Fixed assets 8,297 8,533 8,733 8,913 Other LT assets 9,300 9,561 9,803 10,045 Cash/ST investment 3,907 4,387 4,805 5,045 Other current assets 15,529 16,461 17,612 19,042 Total assets 37,032 38,943 40,953 43,046 ST debt 12,689 12,689 12,689 12,689 Other current liabilities 4,034 4,155 4,346 4,575 LT debt 4,331 5,331 6,331 7,331 Other LT liabilities Shareholders' equity 14,435 15,122 15,842 16,601 Minority interest 944 1,041 1,137 1,238 Total liabilities & equity 37,032 38,943 40,953 43,046 CASH FLOW Year to 31 Dec (US$m) F 2018F 2019F Operating 1, Pre-tax profit 1,300 1,791 1,869 1,971 Tax (307) (376) (392) (414) Deprec. & amort Working capital changes (523) (1,144) (1,267) (1,519) Other operating cashflows (111) (125) (133) (141) Investing (955) (1,202) (1,202) (1,202) Capex (maintenance) (725) (1,002) (1,002) (1,002) Investments (143) (200) (200) (200) Proceeds from sale of assets Others (87) Financing (272) Dividend payments (371) (305) (319) (336) Issue of shares Proceeds from borrowings (2,157) 1,000 1,000 1,000 Others/interest paid 2,257 (101) (101) (101) Net cash inflow (outflow) (103) Beginning cash & cash equivalent 1,026 1,068 1,548 1,966 Changes due to forex impact Ending cash & cash equivalent 924 1,404 1,822 2,061 KEY METRICS Year to 31 Dec (%) F 2018F 2019F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit (5.8) Net profit (5.0) Net profit (adj.) (14.4) EPS (14.4) Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

24 COMPANY RESULTS Bangkok Expressway and Metro (BEM TB) 1Q17: Flat Results, But Set To Improve Despite higher earnings, margins seem to be under pressure from the high costs of new services. However, margins are expected to improve over time as customers get accustomed to the new services. In addition, the recently-awarded Blue Line Extension concession and the likelihood of other transport services contract wins will underpin BEM s long-term growth. Maintain BUY. Target price: Bt Q17 RESULTS Year to 31 Dec 1Q17 1Q16 y-o-y q-o-q Remarks Dec (Btm) %chg % chg Sales 3,731 3, Opnening SOE and running Purple Line Gross Profit 1,410 1, EBITDA 2,067 1, High cost of opening new services Pre-tax Profit No capitalization of construction cost Tax (172) (161) Net Profit Net Profit (Ex EI) EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Source: Bangkok Expressway and Metro, UOB Kay Hian RESULTS Flat earnings. Bangkok Expressway and Metro s (BEM) 1Q17 earnings came in at Bt702m, flat yoy. The results were 7-5% below our and consensus forecasts due to high expenses from the launch of several new services. 1Q17 sales increased 23% yoy to Bt3.7b. Expressway revenue rose 8% yoy on the opening of new expressway services (Sirat Outer Ring Road Expressway: SOE) in Aug 16 while average daily traffic volume increased 2% yoy. Rail revenue rose 83% yoy from services rendered to the Purple Line railway for the Mass Rapid Transit Authority (MRTA) while average daily traffic volume increased by 8% yoy. Although 1Q17 sales saw healthy growth, the high cost of providing new services pressured margins. 1Q17 EBITDA margin fell to 55% (62% in 1Q16). Without capitalisation of construction costs relating to the SOE, 1Q17 interest expenses rose 36% yoy. In addition, equity accounts from associates in 1Q17 also declined by 23% yoy on loss of contribution from CK Power (19.4% owned). KEY FINANCIALS Year to 31 Dec (Btm) F 2018F 2019F Net turnover 11,738 13,103 15,428 16,903 18,877 EBITDA 6,837 7,585 8,255 9,541 10,652 Operating profit 3,527 4,146 4,716 5,500 6,232 Net profit (rep./act.) 2,650 2,606 3,109 3,603 3,831 Net profit (adj.) 2,160 2,575 3,109 3,603 3,831 EPS (Bt) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit - - 3,419 3,966 4,749 UOBKH/Consensus (x) Source: Bangkok Expressway and Metro, Bloomberg, UOB Kay Hian n.m. : not meaningful; negative P/E, EV/EBITDA reflected as "n.m." BUY (Maintained) Share Price Target Price Bt7.25 Bt9.00 Upside +24.1% (Previous TP Bt10.00) COMPANY DESCRIPTION An operator of expressway and train services in Bangkok and suburban areas under the concessions of the Expressway Authority of Thailand and the Mass Rapid Transit Authority of Thailand. STOCK DATA GICS sector Industrials Bloomberg ticker: BEM TB Shares issued (m): 15,285.0 Market cap (Btm): 110,816.3 Market cap (US$m): 3, mth avg daily t'over (US$m): 10.5 Price Performance (%) 52-week high/low Bt8.50/Bt6.10 1mth 3mth 6mth 1yr YTD (2.0) 0.7 (5.2) 13.3 (2.7) Major Shareholders % CH Karnchang group 30.9 Mass Rapid Transit Authority of Thailand 8.2 Krung Thai Bank 6.9 FY17 NAV/Share (Bt) 2.06 FY17 Net Debt/Share (Bt) 2.65 PRICE CHART (lcy) BANGKOK EXPRESSWAY & METRO P BANGKOK EXPRESSWAY & METRO P/SET INDEX 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Volume (m) Kowit Pongwinyoo kowit.p@uobkayhian.co.th (%)

25 STOCK IMPACT Sales continue to grow and margins will gradually improve. We expect revenue will continue to grow in 2Q17 as most of the new services were rolled out in Aug 16. Margins will remain under pressure on the high expenses of new businesses. However, we expect margins will gradually improve over time when consumers become accustomed to the new services while existing businesses will continue to grow in line with the expansion of Thailand s suburban areas and with people trying to avoid traffic congestions in Bangkok by travelling on routes operated by BEM. Both toll fees and rail tickets are subject to price increases next year. EARNINGS REVISION/RISK Forecast revisions. Due to the lower-than-expected 1Q17 results, we have revised down our 2017 and 2018 sales and earnings forecasts. Our new forecasts suggest 2017 and 2018 sales would grow 18% and 10% yoy to B15.4b and Bt16.9b respectively, thanks to the new services offered by BEM and 2018 earnings are forecasted to rise by 21% and 16%, yoy to Bt3.1b and Bt3.6b on improving margins as well as good contribution from associates. VALUATION/RECOMMENDATION Cut target price to Bt9.00. Factoring in our lower earnings estimates, we trim BEM s target price to Bt9.00 which is based on the DCF model and a discount rate of 7% (inclusive of the Blue Line Extension). Maintain BUY. Given that sales are expected to continue growing, margins are likely to gradually improve and share price still offering 24% upside, we maintain our BUY call. As a major operator of expressway and subway train services, BEM is in a position to win more expressway and subway train contracts which are now under construction. SHARE PRICE CATALYST Extension of major expressway contracts which will end in FORECAST REVISION 2017F 2018F (Btm) Old New %chg Old New %chg Sales 16,261 15,428-5% 18,302 16,903-8% Core profits 3,444 3,109-10% 4,290 3,603-16% Source: UOB Kay Hian QUARTERLY AVERAGE DAILY TRAFFIC GROWTH Traffic Vol.('000) 1,220 1,200 1,180 1,160 1,140 1,120 1,100 1,080 1,060 1,040 1Q15 2Q15 3Q15 Source: BECL, UOB Kay Hian 4Q15 1Q16 2Q16 3Q16 (% yoy) 1,202 8% 1,194 7% 6% 5% 4% 3% 2% 1% 1.2% 0% QUARTERLY AVERAGE DAILY RIDERSHIP GROWTH ('000) 1Q15 2Q15 3Q15 Source: BEM, UOB Kay Hian 4Q15 QUARTERLY MARGINS % Q16 2Q16 3Q16 4Q16 4Q16 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 EBITDA Net Source: BEM, UOB Kay Hian SALES AND CORE PROFIT GROWTH (Btm) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, F 2018F Sales Core profit Core profit growth Sales growth Source: BEM, UOB Kay Hian Q17 (% yoy) % 1Q17 (%) % 8% 6% 4% 2% 0% 2% 4% 6% 8% P/E AND SD PE Forward S.D., 42.8x +2S.D., 39.6x +1S.D., 36.3x Mean, 33.0x -1S.D., 29.8x 28-2S.D., 26.5x 26 Jan-16 Apr-16 Jul-16 Oct-16 Feb-17 May-17 Aug-17 Source: UOB Kay Hian 25

26 PROFIT & LOSS Year to 31 Dec (Btm) F 2018F 2019F Net turnover 13,103 15,428 16,903 18,877 EBITDA 7,585 8,255 9,541 10,652 Deprec. & amort. 3,439 3,539 4,041 4,420 EBIT 4,146 4,716 5,500 6,232 Total other non-operating income Associate contributions Net interest income/(expense) (1,446) (1,474) (1,685) (2,254) Pre-tax profit 3,145 3,777 4,387 4,648 Tax (563) (669) (784) (817) Minorities (7) Net profit 2,606 3,109 3,603 3,831 Net profit (adj.) 2,575 3,109 3,603 3,831 BALANCE SHEET Year to 31 Dec (Btm) F 2018F 2019F Fixed assets 59,480 65,102 74,251 69,921 Other LT assets 14,087 14,656 15,232 16,455 Cash/ST investment 6,718 6,285 7,094 2,190 Other current assets 2, Total assets 82,786 86,288 96,837 88,843 ST debt 6,783 8,083 13,732 9,131 Other current liabilities 2,774 5,927 6,124 4,853 LT debt 40,120 38,671 42,931 38,820 Other LT liabilities 3,326 2, Shareholders' equity 29,690 31,496 33,234 35,083 Minority interest Total liabilities & equity 82,786 86,288 96,837 88,843 CASH FLOW Year to 31 Dec (Btm) F 2018F 2019F Operating 3,067 12,864 7,642 7,517 Pre-tax profit 2,829 3,343 3,919 4,084 Tax (563) (669) (784) (817) Deprec. & amort. 3,439 3,539 4,041 4,420 Associates Working capital changes (3,508) 5,708 (453) (1,121) Non-cash items Investing (6,561) (11,849) (14,882) (1,732) Capex (growth) (6,561) (11,849) (14,882) (1,732) Capex (maintenance) n.a. n.a. n.a. n.a. Proceeds from sale of assets n.a. n.a. n.a. n.a. Financing 5,232 (1,448) 8,048 (10,690) Dividend payments (1,834) (1,303) (1,865) (1,982) Issue of shares Proceeds from borrowings 7, ,913 0 Loan repayment 0 (145) 0 (8,708) Others/interest paid Net cash inflow (outflow) 1,738 (433) 809 (4,905) Beginning cash & cash equivalent 4,980 6,718 6,285 7,094 Ending cash & cash equivalent 6,718 6,285 7,094 2,190 KEY METRICS Year to 31 Dec (%) F 2018F 2019F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit (1.7) Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

27 COMPANY RESULTS KCE Electronics (KCE TB) 1Q17: High Expectations Factored In KCE reported 1Q17 core profit of Bt623m (-14% yoy, -6% qoq). Key negative was a sharp drop in gross margin due to rising copper foil prices. We expect earnings momentum to improve for the rest of the year and its long-term core business to remain intact. Maintain HOLD with a new target price of Bt Entry price: Bt Q17 RESULTS Year to 31 Dec (Btm) 1Q17 4Q16 1Q16 qoq % chg yoy % chg Net turnover 3,536 3,174 3, Gross profit 1,084 1,080 1, EBIT Net income EPS (Bt) Core profit Ratio (%) qoq ppt chg yoy ppt chg Gross margin SG&A % of sales Net margin Source: KCE, UOB Kay Hian RESULTS Sales flat yoy but up 11% qoq. KCE Electronics (KCE) reported 1Q17 sales of Bt3.5b, flat yoy and up 11% qoq. The yoy growth seems sluggish despite growing demand for auto PCB. Key negatives were: a) lower PCB selling prices (-2% yoy), b) the baht appreciating to Bt35.10/US$, and c) some customers changing delivery modes from air freight to shipping, resulting in a partial delay in revenue recognition by 3%. Excluding the impact of currency movement, sales in US dollars were US$101m (+2% yoy, +12% qoq). Gross margin plunged to 30.7%, the lowest in two years. The better efficiency at its new plant was more than offset by rising copper foil prices and the baht appreciation. This led to a sharp drop in gross margin to 33.7% (-330bp yoy, -340bp qoq). Core profit lower than consensus expectation by 10%. Excluding extraordinary items (forex gains: Bt39m), core profit in 1Q17 was Bt623m (-14% yoy, -6% qoq), lower than consensus expectation by 10%. 1Q17 core profit accounts for 17% of consensus fullyear forecast. KEY FINANCIALS Year to 31 Dec (Btm) F 2018F 2019F Net turnover 12,449 13,797 16,076 18,258 19,985 EBITDA 3,112 4,054 4,436 5,006 5,526 Operating profit 2,428 3,172 3,582 4,150 4,633 Net profit (rep./act.) 2,240 3,039 3,403 3,965 4,453 Net profit (adj.) 2,192 2,935 3,403 3,965 4,453 EPS (Bt) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (2.1) (10.6) Interest cover (x) ROE (%) Consensus net profit - - 3,648 4,315 4,866 UOBKH/Consensus (x) Source: KCE, Bloomberg, UOB Kay Hian HOLD (Maintained) Share Price Target Price Bt Bt Upside -8.1% (Previous TP Bt105.00) COMPANY DESCRIPTION KCE Electronics manufactures and distributes printed circuit boards under the KCE trademark. The compan focuses on the automobile PCB segment. STOCK DATA GICS sector Information Technology Bloomberg ticker: KCE TB Shares issued (m): Market cap (Btm): 65,090.0 Market cap (US$m): 1, mth avg daily t'over (US$m): 8.7 Price Performance (%) 52-week high/low Bt129.00/Bt mth 3mth 6mth 1yr YTD (9.0) Major Shareholders % Ongkosit Familiy 34.0 Apco Capital 7.5 State Street Bank Europe Limited 3.5 FY17 NAV/Share (Bt) FY17 Net Debt/Share (Bt) 3.11 PRICE CHART (lcy) Volume (m) KCE ELECTRONICS PUB CO LTD KCE ELECTRONICS PUB CO LTD/SET INDEX (%) May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYST Napat Vorajanyavong napat@uobkayhian.co.th 27

28 STOCK IMPACT Copper foil prices expected to decline gradually, given the more balanced demandsupply dynamics. Copper foil is a key raw material used in the production process of PCBs, accounting for 10-15% of KCE s cost of goods sold. Copper foil prices depend on two factors: a) the average copper (London Metal Exchange or LME) price in the previous month, and b) copper foil processing fees. Although the LME copper prices dropped from the high of US$6,058/MT in Feb 17 to around US$5,580/MT in the beginning of May 17, cost of copper foil production for PCB remains at a high of US$4,500-5,000/MT (a 50-70% yoy increase) as several copper foil manufacturers have allocated part of their production lines to produce copper foil used in lithium battery for electric vehicles (EV), while some PCB makers hoarded copper foil as inventory. Management guidance suggests a more balanced demand-supply ahead and a gradual decline in copper foil prices. On track to increase capacity by 200,000sf/month. KCE will expand its PCB production capacity by 6% (200,000sf/month) in 2Q16 to meet strong PCB demand. Its current utilisation rate is 90%. SALES BREAKDOWN Source: KEC, UOB Kay Hian GLOBAL PCB OUTLOOK High expectations built into share price. The company entered 1Q with poor earnings growth momentum. Hence, there is high expectation to meet consensus earnings growth forecast of 22% for As a result, there could be a short-term overhang on share price since earnings are at risk of being downgraded by consensus. EARNINGS REVISION/RISK We revised our earnings forecast by 4-5% to mainly factor lower gross margin assumption. EARNINGS REVISION Year to 31 Dec (Btm) 2017F Old 2017F New Chg (%) 2018F Old 2018F New Chg (%) Net turnover 16,076 16,076-18,258 18,258 - Core profit 3,567 3,403 (4.6) 4,146 3,965 (4.4) Core EPS (Bt) (4.6) (4.4) Gross Margin (%) ppt ppt Source: UOB Kay Hian Source: Prismark REGIONAL PEERS - PE BAND VALUATION/RECOMMENDATION Maintain HOLD. For the longer term, KCE s core business would remain intact due to rising auto PBC demand. One of the factors driving this optimism is that cars are required to have greater intelligence, connectivity and sophisticated electronics. Maintain HOLD with a new target price of Bt102.00, based on 17.5x 2017F PE, or +1SD to regional peers 5-year mean. We suggest entry price at Bt Source: Bloomberg, UOB Kay Hian KCE deserves to trade at a premium to regional peers as it would gain more global market share given its highest gross margin globally and penetrating into more complex PCBs, as some competitors are struggling to improve productivity and cost structure. As evidence, KCE s global market share has risen for more than three consecutive years. SHARE PRICE CATALYST Baht depreciation. 28

29 PROFIT & LOSS Year to 31 Dec (Btm) F 2018F 2019F Net turnover 13,797 16,076 18,258 19,985 EBITDA 4,054 4,436 5,006 5,526 Deprec. & amort EBIT 3,172 3,582 4,150 4,633 Total other non-operating income Associate contributions Net interest income/(expense) (171) (107) (99) (81) Pre-tax profit 3,155 3,500 4,076 4,576 Tax (98) (85) (98) (110) Minorities (18) (12) (12) (12) Net profit 3,039 3,403 3,965 4,453 Net profit (adj.) 2,935 3,403 3,965 4,453 BALANCE SHEET Year to 31 Dec (Btm) F 2018F 2019F Fixed assets 9,137 8,984 8,828 9,434 Other LT assets Cash/ST investment 892 1,729 3,613 4,577 Other current assets 6,404 7,504 8,507 9,307 Total assets 17,328 18,916 21,647 24,017 ST debt 2,373 1,905 2,143 2,060 Other current liabilities 2,571 2,730 3,130 3,396 LT debt 2,148 1,648 1, Other LT liabilities Shareholders' equity 10,028 12,421 15,011 17,695 Minority interest Total liabilities & equity 17,328 18,916 21,647 24,017 CASH FLOW Year to 31 Dec (Btm) F 2018F 2019F Operating 4,374 2,763 4,231 4,825 Pre-tax profit 3,155 3,500 4,076 4,576 Tax (111) (85) (98) (110) Deprec. & amort Associates Working capital changes 243 (939) (594) (529) Non-cash items Other operating cashflows (12) (567) (8) (6) Investing (1,032) (504) (700) (1,500) Capex (growth) (853) (700) (700) (1,500) Capex (maintenance) Investments Proceeds from sale of assets (190) Others Financing (3,122) (1,422) (1,647) (2,361) Dividend payments (1,171) (1,021) (1,388) (1,781) Issue of shares 0 (1) 0 0 Proceeds from borrowings 783 (500) (500) (500) Loan repayment (2,202) Others/interest paid (532) (80) Net cash inflow (outflow) , Beginning cash & cash equivalent ,729 3,613 Changes due to forex impact (1) Ending cash & cash equivalent 892 1,729 3,613 4,577 KEY METRICS Year to 31 Dec (%) F 2018F 2019F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity (2.1) (10.6) Interest cover (x)

30 COMPANY RESULTS PTT Global Chemical (PTTGC TB) 1Q17: Could Be This Year s Peak Quarter; Potential 2017 Earnings Upgrade From Both Consensus And Us PTTGC posted a Bt13.2b net profit, beating our estimate by 9.9% and consensus by 12.8% on the back of an unexpectedly large contribution from the aromatics business. The market is overreacting negatively to PTTGC s peak earnings in 1Q17. We and consensus might upgrade 2017 earnings on the back of sustainable high petrochemical prices and spreads. Maintain BUY. Target price: Bt Q17 RESULTS Year to 31 Dec 1Q16 4Q16 1Q17 yoy qoq (Btm) (Btm) (Btm) % change % change Revenue 80, , , % -2.3% Operating cost (69,985) (81,286) (87,531) 25.1% 7.7% SG&A expense (2,285) (3,279) (2,645) 15.8% -19.3% EBITDA 9,515 16,304 18, % 14.2% Depn & Amort (4,141) (4,514) (5,032) 21.5% 11.5% EBIT 5,374 11,790 13, % 15.2% FX gain/(loss) 632 (165) 1, % n.a. Tax expense (623) (1,000) (1,597) 156.3% 59.7% Recurring income 4,306 9,406 11, % 18.4% Net income 4,707 9,744 13, % 35.3% EPS (Bt) % 35.3% Gross margin (%) 13.3% 25.9% 18.3% EBITDA margin (%) 11.8% 14.9% 17.4% Net profit margin (%) 5.8% 8.9% 12.3% Source: PTT Global Chemical, UOB Kay Hian RESULTS Positive earnings surprises in 1Q17. PTT Global Chemical (PTTGC) posted a Bt13.2b net profit, above our and consensus estimates by 9.9% and 12.8% respectively. This came mainly on the back of the unexpectedly large contribution from aromatics business despite a planned slowdown of some small units in this segment (1Q17 utilisation rate: 78%, 4Q16: 82%, 1Q16: 90%) and underestimation of contribution of Project Max, a project to improve plant efficiency and lower cost of production that was implemented in 4Q16 (1Q17: Bt652m, 4Q16: Bt246m). KEY FINANCIALS Year to 31 Dec (Btm) F 2018F 2019F Net turnover 403, , , , ,430 EBITDA 44,740 45,312 55,108 57,170 56,632 Operating profit 42,234 28,007 35,943 36,540 37,002 Net profit (rep./act.) 20,502 25,601 31,025 31,632 32,077 Net profit (adj.) 25,944 21,334 31,025 31,632 32,077 EPS (Bt) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit ,903 32,438 33,005 UOBKH/Consensus (x) Source: PTT Global Chemical Public Company Limited, Bloomberg, UOB Kay Hian n.m. : not meaningful; negative P/E, EV/EBITDA reflected as "n.m." BUY (Maintained) Share Price Target Price Bt73.50 Bt83.00 Upside +12.9% COMPANY DESCRIPTION PTT Global Chemical is a fully integrated petrochemical and chemical company. The company s products are derived from its main product, olefins, namely ethylene and propylene. STOCK DATA GICS sector Materials Bloomberg ticker: PTTGC TB Shares issued (m): 4,460.8 Market cap (Btm): 327,868.5 Market cap (US$m): 9, mth avg daily t'over (US$m): 23.5 Price Performance (%) 52-week high/low Bt75.75/Bt mth 3mth 6mth 1yr YTD Major Shareholders % PTT 48.9 NDVR 6.1 FY17 NAV/Share (Bt) FY17 Net Debt/Share (Bt) PRICE CHART (lcy) PTT GLOBAL CHEMICAL PCL PTT GLOBAL CHEMICAL PCL/SET INDEX 0 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 May 17 Source: Bloomberg ANALYSTS Volume (m) Tanaporn Visaruthaphong tanaporn@uobkayhian.co.th Chaiwat Arsirawichai chaiwat@uobkayhian.co.th (%)

31 KEY VALUE DRIVER yoy qoq 1Q16 4Q16 1Q17 % change % change Refinery Business CDU Utilisation rate (%) 93% 103% 102% Marketing GRM (Exl. Stock gain/(loss) % -8.1% (US$/bbl) Refinery EBITDA Margin (%) 8% 4% 6% Aromatics Business BTX Utilisation rate (%) 90% 82% 78% Market Product to Feed (P2F) (US$/ton) % 52.1% Aromatics EBITDA Margin (%) 14% 13% 22% Olefins Business Polyethylene Utilisation rate (%) 89% 113% 116% Olefins EBIDA Margin (%) 20% 28% 35% Source: PTT Global Chemical, UOB Kay Hian STOCK IMPACT Strong 35% qoq increase in 1Q17 net profit came from: a) a healthier margin, especially from core products spread in aromatics segment and Butadiene (a by-product from olefins business) despite a slight decline in utilisation rates in both businesses, b) a higher contribution from Project Max, and c) huge non-recurring items including forex gain of Bt1.5b in 1Q17 (4Q16: loss of Bt165m, 1Q16: Bt632m) and an inventory gain of Bt508m in 1Q17 (4Q16: Bt2.4b, 1Q16: loss of Bt274m). Market is overreacting negatively to PTTGC s peak earnings in 1Q17. We agree that PTTGC s core profit in 1Q17 is likely to be a peak quarter for this year on the back of good margins in all businesses. Meanwhile in 2Q17, qtd prices and spreads for all petrochemical products in the region are softening qoq as petrochemical plants in the region, which faced the unplanned shutdowns in 1Q17, are gradually resuming their operations. Moreover, PTTGC has a 39-day planned shutdown for its olefins unit #2 (20% of total capacity) starting in June, which may result in lower sales volume. Based on our channel check, PTTGC is building up its inventory to sell during the planned shutdown and this could partly relieve concerns on lower sales volume in 2Q17. The softened prices and spreads in petrochemical products qtd are better than that in 4Q16 when the company posted Bt9.4b core profit. The gradual increase in contribution of Project Max will also help (management targets Bt3.2b contribution from this programme) bottom-line. We roughly estimate PTTGC to post a core profit of Bt7.5b-8b in 2Q17. If this happens, 1H17 core profit for PTTGC could come in at Bt18b-19b and could result in an upgrade in 2017 earnings estimate from both consensus and us. Note that 1Q17 core earnings accounted for 36% of our full-year forecasts. PRICES AND SPREADS (US$/tonne) 1Q16 4Q16 1Q17 2Q17 (qtd) Dubai price (US$/bbl) HDPE price 1,103 1,134 1,176 1,157 HDPE Spread PX spread over condensate BZ spread over condensate Source: PTTGC, UOB Kay Hian REVENUE & ADJUSTED EBITDA STRUCTURE IN 1Q17 Source: PTTGC FORWARD CORE PE BAND Source: Bloomberg, UOB Kay Hian EARNINGS REVISION/RISK We will revisit our 2017 earnings forecast after attending next week s analyst meeting. HDPE price sensitivity. Our sensitivity analysis indicates that every US$100/tonne increase from our HDPE price assumption of US$1,240/tonne will raise our 2017 net profit by Bt3.2b. GRM sensitivity. Our sensitivity analysis shows that every US$1/bbl decline in GRM from our base assumption for GRM is US$4.9/bbl will lower our net profit forecast for 2017 by Bt1.6b. VALUATION/RECOMMENDATION Maintain BUY and target price of Bt83.00, based on +1SD over PTTGC s 5-year forward core PE of 12x. Currently, it is trading at 10.7x 2017F core PE. PTTGC is one of our top picks in the O&G segment. 31