CP ALL. Buy (16E TP Bt54.00) Close Bt46.00 Commerce April 27, Company Update. Expansion and product mix driven

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1 Company Update CP ALL Earnings upgrade/earnings downgrade/overview unchanged Buy (16E TP Bt54.00) Close Bt46.00 Commerce April 27, 2016 Expansion and product mix driven Price Performance (%) Source: SET Smart FY16 FY17 Consensus EPS (Bt) KT ZMICO vs. consensus 5.6% 7.8% Share data Reuters / Bloomberg CPALL.BK/CPALL TB Paid up Shares (m) 8, Par (Bt) 1.00 Market cap (Bt bn / US$ m) /11, Foreign limit / actual (%) 49.00/ week High / Low (Bt) 51.75/39.00 Avg. daily T/O (shares 000) 20, NVDR (%) 7.16 Estimated free float (%) 58.3 Beta 0.90 URL CGR Anti corruption Note: KT ZMICO is a Financial Advisor for CPALL and MAKRO Pornsawat Jirajarus Analyst no pornsawatj@ktzmico.com 66 (0) Share price climbing back CPALL s share price has gradually climbed back 18% YTD, which seems to imply lessening concern to a certain degree regarding the issue of the stock facing sell off pressure due to the scandal with its executives. We maintain our positive view on the long term outlook of the company, reckoning that its dominance in the convenience store and cash & carry businesses, well established supply chain structure, expansion and the ability to improve the product mix remain key attractions. The stock at 27x 16E earnings (+0.7 SD.) and 32% average ROE looks attractive for accumulation; we maintain a Buy rating. Sales growth remains soft, driven by new stores On the convenience store side, same store sales should continue inching up 1 2% YoY, continuing the weak trend from the past 3 4 quarters. The growing tourism industry, along with new product assortments and promotions should be positive factors reducing the impact from the slowing economy. New stores of around 700 outlets YoY (+200 in 1Q16 to around 9,000 stores) will be the key driver for 11% sales growth. MAKRO should exhibit flat growth in same store sales, with new stores (+9 big format stores and 7 frozen stops YoY; +2 big stores and 2 frozen shops in 1Q16) to be the main driver for 8% YoY cash & carry sales growth. Expect 1Q16 net profit to rise 16% YoY We expect CPALL to report 1Q16 net profit at Bt3.95bn, up 16% YoY and 2% QoQ (off pattern from the peak season in Q1). MAKRO s profit should be Bt1.25bn ( 19% YoY). The consolidated gross margin is likely to decline 36 bps YoY to 21.0%, blended between 25.7% of convenience stores (unchanged YoY) and 11.2% of the cash & carry business ( 80 bps YoY due to the absence of a positive impact from the sales adjustment in ). Well controlled SG&A expenses on convenience stores, despite an increase at MAKRO, and declining interest expenses should shore up profitability, resulting in a net margin of 3.7%, up 21 bps YoY. The net profit accounts for 26% of the full year forecast. Slowing economy could be downside risk Weak agricultural prices and the slow economic recovery that is likely to continue in Q2 Q3 cause us to maintain the forecasts, although our 1Q16 profit estimate and the company s plan for rolling out 700 new stores this year (higher than the 600 stores in our estimate) indicate some upside risk. The concern over the issue of top executives involvement in an insider trading scandal seems to be easing, although there is still a possibility that some institutions may gradually reduce their position. We maintain our forecast that CPALL will be able to reduce net debt to equity from 4.0x at end FY15 to below 3.5x by the end of this year. Financials and Valuation FY Ended 31 Dec E 2017E 2018E Revenues (Btmn) 357, , , , ,608 Net profit (Btmn) 10,154 13,682 15,022 17,317 19,441 EPS (Bt) EPS growth (%) 3.63% 34.14% 9.79% 15.28% 12.27% Dividend (Bt) BV (Bt) FY Ended 31 Dec E 2017E 2018E PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) 1.88% 2.29% 2.17% 2.39% 2.61% ROE (%) 29.86% 35.64% 33.21% 32.64% 31.25% Net gearing (%) % % % % % REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5

2 Figure 1: Quarterly earnings preview Profit and Loss (Btmn) FY Ended 31 Dec % YoY % QoQ E % YoY % YTD Revenue 95,554 97,292 96, , , , , Gross profit 20,429 21,158 21,296 22,417 21, (2.0) 85,299 96, EBITDA 8,104 7,684 7,808 8,567 8, ,827 35, Interest expense (2,263) (2,167) (2,074) (2,082) (2,030) (10.3) (2.5) (8,586) (8,754) Other income 3,227 3,384 3,673 3,792 3, (9.3) 14,076 16, Income tax (842) (716) (718) (790) (934) (3,066) (3,798) Forex gain (loss) (19) (36) n.m. n.m. (4) (34) n.m. Other extra items n.m. n.m. 0 0 n.m. n.m. Gn (Ls) from affiliates n.m. n.m. Net profit (loss) 3,408 3,140 3,258 3,877 3, ,682 15, Normalized profit (loss) 3,428 3,176 3,232 3,851 3, ,687 15, Reported EPS (THB) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) n.a Interest coverage (x) Debt / equity (x) n.a BVPS (Bt) n.a ROE (%) n.a Source: company, KT Zmico Research Figure 2: Same store sales growth and sales growth 40% Same-store-sales growth - YoY 40% Sales growth - YoY 30% CPALL MAKRO 30% CPALL MAKRO 20% 20% 10% 10% 0% 0% -10% Source: company, KT Zmico Research Figure 3: Gross margin trends 28% Convenience stores' gross margin 14% Cash & Carry stores' gross margin GM -Food GM -Non-Food GM - CPALL 26% 12% 24% 10% 22% 8% Source: companies, KT Zmico Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5

3 Figure 4: PE, PBV bands PE Band (X) S.D S.D Avg S.D. 5 0 Jan-07 Jun-07 Nov-07 Apr-08 Oct-08 Mar-09 Aug-09 Feb-10 Jul-10 Dec-10 May-11 Nov-11 Apr-12 Sep-12 Mar-13 Aug-13 Jan-14 Jun-14 Dec-14 May-15 Oct-15 Apr-16 (X) S.D. +1 S.D. Avg. -1 S.D. -2 S.D. PBV band Jan-07 Jun-07 Nov-07 Apr-08 Oct-08 Mar-09 Aug-09 Feb-10 Jul-10 Dec-10 May-11 Nov-11 Apr-12 Sep-12 Mar-13 Aug-13 Jan-14 Jun-14 Dec-14 May-15 Oct-15 Apr-16 Source: Companies data, KT Zmico estimates REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5

4 PROFIT & LOSS (Btmn) E 2017E 2018E Revenues 272, , , , , ,608 Cost of sales and service (210,657) (281,443) (306,519) (347,854) (384,541) (422,744) Gross profit 61,629 76,323 85,299 96, , ,865 SG&A (58,309) (68,750) (73,901) (84,603) (93,519) (103,911) EBITDA 19,760 27,417 32,827 35,817 39,318 41,938 Depreciation & amortization 4,625 6,310 7,357 8,073 8,712 9,322 EBIT 15,135 21,107 25,469 27,744 30,606 32,616 Interest expense (2,214) (8,518) (8,586) (8,754) (8,715) (8,040) Other income / exp. 12,313 13,158 14,076 16,282 17,967 19,708 EBT 15,135 21,107 25,469 27,744 30,606 32,616 Corporate tax (2,292) (2,270) (3,066) (3,798) (4,379) (4,915) Forex gain (loss) (570) 377 (4) (34) (40) (46) Extra Items 501 (377) Gain (loss) from affiliates Net profit 10,537 10,200 13,682 15,022 17,317 19,441 Reported EPS Fully diluted EPS Core net profit 11,038 9,823 13,687 15,022 17,317 19,441 Core EPS Dividend (Bt) BALANCE SHEET (Btmn) E 2017E 2018E Ca sh and equivalents 24,632 32,204 21,518 20,531 15,813 15,387 Accounts receivable ,034 1,824 2,017 2,218 Inventories 19,916 22,167 25,072 28,591 31,606 34,746 PP&E net 71,273 80,201 89,447 94,189 98, ,764 Other assets 178, , , , , ,064 Total assets 304, , , , , ,968 ST debt & current portion 135,143 19,640 23,723 18,000 13,342 13,342 Long term debt 50, , , , , ,159 Total liabilities 271, , , , , ,877 Paid up shares 8,983 8,983 8,983 8,983 8,983 8,983 Shareholder equity 32,970 35,104 41,676 48,782 57,312 67,091 Total liab. & shareholder equity 304, , , , , ,968 CASH FLOW (Btmn) E 2017E 2018E Net income 10,537 10,200 13,682 15,022 17,317 19,441 Depreciation & amortization 4,625 6,310 7,357 8,073 8,712 9,322 Change in working capital 7,673 1, ,336 4,116 4,288 Forex and other extra adjustme (926) Cash flow from operations (5,959) 19,204 23,186 31,968 34,543 38,361 Ca pex (Invest)/Divest (197,934) (15,080) (14,794) (13,350) (13,620) (13,906) Cash flow from investing (197,934) (15,080) (14,794) (13,350) (13,620) (13,906) Debt financing (repayment) 196,064 12,616 (9,231) (11,520) (16,658) (15,000) Equity financing Dividend payment (8,085) (8,085) (7,186) (8,085) (8,983) (9,881) Cash flow from financing 187,979 4,531 (16,417) (19,605) (25,641) (24,881) Net change in cash (15,914) 8,655 (8,025) (987) (4,718) (427) Free cash flow (203,893) 4,124 8,392 18,618 20,923 24,455 FCF per share (Bt) (22.70) PROFITABILITY E 2017E 2018E Revenue growth (%) EBITDA growth (%) EPS growth (%) (4.6) (3.2) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5

5 Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY, BIGC, BJC. KT ZMICO is a co underwriter of TPBI. Anti corruption Progress Indicator Level 1 (Committed) : Organization s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user. KT ZMICO RESEARCH RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between 10% to +15%; returns expected to exceed market returns over a six month period due to specific catalysts UNDERPERFORM: Expecting total returns between 10% to +15%; returns expected to be below market returns over a six month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months. REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5

6 KT ZMICO Securities Company Limited 8 th, 15 th -17 th, 19 th, 21 st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok Telephone: (66-2) Fax. (66-2) Phaholyothin Branch 3 rd Floor, Shinnawatra Tower II, 1291/1 Phaholyothin Road, Phayathai, Bangkok Telephone: (66-2) Fax. (66-2) Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang, Nakhon Pathom Province Telephone: (034) Fax: (034) #100 Chachoengsao Branch 108/34-36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao Telephone: (038) Fax. (038) Khon Kaen Branch 5 th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen Telephone: (043) Fax. (043) Central World Branch 999/9 The Offices at Central World, 16 th Fl., Rama 1 Rd, Pathumwan, Bangkok Telephone: (66-2) , (66-2) Fax. (66-2) Pak Chong Branch , Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima Tel. (044) Fax. (044) Nakhon Ratchasima Branch 624/9 Changphuek Road,. Naimaung, A.Maung, Nakhon Ratchasima Telephone: (044) Fax: (044) Ploenchit Branch 8 th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok Telephone: (66-2) Fax. (66-2) Viphavadee Branch G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee-Rangsit Road, Ladyao, Jatujak, Bangkok Telephone: (66-2) Fax. (66-2) Chonburi Branch 4 th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi Telephone: (038) Fax. (038) Hat Yai Branch 200/301 Juldis Hatyai Plaza Floor 3, Niphat-Uthit 3 Rd, Hatyai Songkhla Telephone: (074) Fax: (074) Chiang Mai Branch 422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai Telephone: (053) Fax: (053) Cyber North Nana Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict, Wattana District, Bangkok Telephone: Sindhorn Branch 2 nd Floor, Sindhorn Tower 1, Wireless Road, Lumpini, Pathumwan, Bangkok Telephone: (66-2) Fax. (66-2) , Phitsanulok Branch Krung Thai Bank, Singhawat Branch 114 Singhawat Road, Muang, Phitsanulok Telephone: Pattaya Branch 382/6-8 Moo 9, T. NongPrue, A. Banglamung, Cholburi Telephone: (038) Fax. (038) Sriworajak Building Branch 1 st 2 nd Floor, Sriworajak Building, 222 Luang Road, Pomprab, Bankgok Telephone: (02) Fax. (02) Phuket Branch 22/61-63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket Tel. (076) ,(076) Fax. (076) Bangkhae Branch 6 th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok Tel. (66-2) Fax. (66-2) Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.