Time Will Pass

17 March, 2017
MARKET UPDATE | Thailand Strategy
Thailand Strategy - Thai Pulse

Storm will pass, spring will come
Expect market to consolidate in 1H17; high valuations are
exposed to further sell-off
Near-term volatility from Fed rate hikes and election in France,
the latter could lead to an exit from Euro
Look for dividend yield, decent growth and cheap valuation
Maintain 2017 SET Index target at 1,650; top picks are BIG, Krungsri Securities Research Team
BLA, BR, HANA, KKP, MINT, PTTGC, QH, SCI, and TU
Analysts
Navigating through the consolidation
Naphat CHANTARASEREKUL
Investors seem reluctant to chase the SET Index above 1,550 due to 662-659-7000 ext 5000
concerns over valuation, moderate market EPS growth (+8%) this naphat.chantaraserekul@krungsrisecurities.com
year, and relatively flat GDP growth of 3.3%. We expect the market to Sunthorn THONGTHIP
662-659-7000 ext 5009
consolidate due to weak consumption and absence of positive sunthorn.thongthip@krungsrisecurities.com
catalysts. Export data of Asian countries is showing positive numbers Jesada TECHAHUSDIN, CFA
in January and this years exports could be a positive surprise given 662-659-7000 ext 5004
jesada.techahusdin@krungsrisecurities.com
that Thailand is a regional hub for supplying raw material to other
Kittisorn PRUITIPAT, CFA, FRM
countries. However, that is insufficient to drive EPS growth in 1H17. 662-659-7000 ext 5019
Market will be pressured by a series of Fed rate hikes. Stocks trading kittisorn.pruitipat@krungsrisecurities.com
at high valuation are most exposed to further sell-off given no positive Karun INTRACHAI
662-659-7000 ext 5010
catalysts in the horizon, including those in retail, renewable energy, Karun.intrachai@krungsrisecurities.com
and healthcare sectors. Worrapong TUNTIWUTHIPONG
662-659-7000 ext 5013
worrapong.tuntiwutthpong@krungsrisecurities.com
Fed rate hikes, election in France make market more volatile
Teerapol UDOMVEJ
Foreign investors have been adjusting portfolios amid rising interest 662-659-7000 ext 5012
rates and political risks in Eurozone. We expect the Fed to hold rate teerapol.udomvej@krungsrisecurities.com
in June as non-farm payroll data look less likely to disappoint the Feds Artit JANSAWANG
long-term projection of 75K-125K. As the Fed turns more hawkish and 662-659-7000 ext 5019
artit.jansawang@krungsrisecurities.com
moves ahead of the curve, we expect two more rate hikes of 25 bps
Nalinee PRAMAN
each in September and December, to lift Fed fund rate to 1.375% by Assistant Analyst
end-2017. The Presidential Election in France on 23 April and 7 May Kitti PITAKTEERABANDIT
could lead to an exit from Eurozone if anti-establishment candidate Assistant Analyst
Ms. Le pen wins. These point to a volatile market in the near-term. (SET index at 1,557)
Figure 1: Top picks (ranked by market capital)
Focus on dividend yield, decent growth, and cheap valuation MCap TP U/D 2017F
BBTicker (US$) (Bt) (%) EPSG% ROE(%) PE(x) P/BV(x) DivYld(%)
Our investment themes are dividend yield, decent growth, cheap PTTGC 9,208 78.0 8 25.3 13.1 9.8 1.2 5.1
valuation, and avoid stocks trading at high PE multiple. We still like MINT
TU
4,379
2,918
43.0 24
25.0 17
21.9
25.0
12.9 25.9
12.9 15.5
3.0
2.2
1.2
3.2
commodities stocks as an inflation hedge but only selective name BLA 2,536 64.0 23 5.5 16.6 16.2 2.5 1.5
KKP 1,718 74.0 4 3.9 14.9 10.4 1.4 7.7
such as PTTGC. 2M17 data indicates mild recovery in Thailands HANA 995 54.0 25 26.1 13.1 13.6 1.7 4.6
tourism sector in the peak tourist season; international arrivals grew QH 814 3.2 20 9.1 13.9 8.1 1.1 5.8
BIG 519 7.0 36 32.5 65.0 16.2 10.5 3.7
by 2% yoy. We expect most tourism stocks to post earnings recovery SCI 242 15.0 33 197.9 23.2 17.3 3.8 2.3
in 1Q17 after mourning period. Small banks will continue to outperform BR 176 8.5 26 75.8 11.6 11.2 1.3 4.5
broad market in the next six months led by improving HP loan demand, Figure 2: Our portfolio returned +7.1% outperforming
better asset quality, and decent dividend yields (KKP). market by 4.9%
SET Index target at 1,650; Top picks are BIG, BLA, BR, HANA,
KKP, MINT, PTTGC, QH, SCI, and TU
We remain positive on the mid-to-long term outlook supported by
accelerating infrastructure spending, which will spillover to investment
and consumption and lift GDP in the longer term. Given rate hikes
headwind, we keep target valuation at 14.5x PE, a slight discount to
historical +1.5SD of PE multiple to reflect macro risks. We expect
consumption and loan demand to recover in 2H17 led by infrastructure
investment and expiry of the first-car scheme lock-in period. Source: SET, Krungsri Securities
Disclaimer: This publication constitutes information disclosed to the public and believed to be reliable but its accuracy and completeness are not guaranteed. All opinions,
suggestions, or projections are for informational purposes only and shall not be construed as an inducement for the sale or purchase of securities. Amendments to this publication
may be made without prior notice. Investors are urged to exercise caution in making a decision to invest in any securities. 1
Market Update | Thailand Strategy March 17, 2017
Table of Contents
Contents Page
Storm will pass, spring will come

Investors in wait & see mode on Fed rate hikes and near-term political events
in Eurozone 3
Key economic data indicate mild recovery 4
SET Index target at 1,650; Top picks are BIG, BLA, BR, HANA, KKP, MINT,
PTTGC, QH, SCI, and TU 10
Our stock picks 12
Thailand Sector Update
Banking OVERWEIGHT 13
Contractor OVERWEIGHT 15
Food & Beverage OVERWEIGHT 16
Life Insurance OVERWEIGHT 18
Petrochemical OVERWEIGHT 19
Property OVERWEIGHT 21
Tourism OVERWEIGHT 23
Airline NEUTRAL 24
Commerce NEUTRAL 25
Consumer Finance NEUTRAL 27
Electronic - NEUTRAL 29
Energy NEUTRAL 33
Healthcare NEUTRAL 34
Media sector NEUTRAL 35
Renewable Energy NEUTRAL 36
Telecom UNDERWEIGHT 39
Utilities UNDERWEIGHT 41
Krungsri Securities Research 2

Investors in wait & see mode on Fed rate hikes and near-
term political events in Eurozone
SET Index is likely to move sideways in 2Q17 in the absence of fresh positive
factors, while foreign investors have been adjusting portfolios amid rising interest
rates and political risks in Eurozone. We expect the Fed to hold rate at the June
meeting to assess conditions in an uncertain environment amid new US
government policies and Eurozone political risks. As non-farm payroll data look
less likely to disappoint the Feds projected long-term trend of 75K-125K and with
the Fed turning more hawkish and getting ahead of the curve, we project two more
rate hikes of another 25 bps each in September and December, to lift Fed fund
rate to 1.375% by end-2017.
Fed funds rate projection at March 2017 meeting December 2016 rate hike failed to tighten financial
conditions, unlike after the December 2015 hike
Source: Bloomberg, Krungsri Securities Source: Krungsri Research
Non-farm payrolls and Feds long-term target Weaker USD would support a sooner rather than later
hike by the Fed
Source: Bloomberg, Krungsri Research Source: Bloomberg, Krungsri Research
There are a lot of major political events in Europe in 2017: (i) the UK will trigger
Article 50 by end-March and would leave the EU by 2Q19, and (ii) Presidential
election in France on 23 April and 7 May could lead to an exit from Eurozone anti-
establishment candidate Ms. Le pen wins. She has promised she would first
negotiate with EU partners and if that failed, she would seek a referendum on
Frances membership in the EU.

The uncertainty could heighten as we move into 2Q17 and could affect Thailands
exports to Europe, albeit only mildly given Europe accounts for 10% of Thailands
exports. This could trigger fund inflows to Asia, similar to the Brexit vote last year.
Political events in Eurozone in 2017
Source: Krungsri Research and Krungsri Securities
Key economic data indicate mild recovery
Thailands 1Q17 economic data should be similar 4Q16 data, which suggests
there is no major recovery in any segment, except export. Government
infrastructure spending estimated at Bt2.3tr will remain the key growth driver, but
the real investments are only expected to kick in from 2H17. Meanwhile, the
government has approved an extra fiscal budget of Bt190bn to stimulate the
economy, which would support our GDP growth projection of 3.3% this year.
In January, the main growth drivers were the continued rise in government
expenditure (+5.0% yoy) and a rebound in exports which registered positive
growth for the third straight month (+8.5% yoy). However, this was mainly due to
a low-base in 2016 and higher prices of farm output. Agricultural sector grew 9.7%
yoy driven by rubber prices which jumped c.80% in 4Q16. We expect export sector
to grow moderately premised on the economic recovery in western countries. But
uncertainty over US trade policies could cap the export recovery as Thailand is a
regional hub for supplying raw material to other Asian countries to produce for re-
export.

Thai exports grew 8.5% in January, but mainly from low- Thailands export markets
base effect in 2016 and higher prices for farm output
Source: MOC, Krungsri Research Source: MOC, Krungsri Research
Private consumption improved 1.3% yoy in January after the government stimulated
consumption by offering tax incentives to boost private spending in December.
Floods in Southern area in first two weeks of January had dragged consumption.
Krungsri Research estimates the losses amounted to 0.13% of Thailands GDP. We
forecast private consumption will recover gradually this quarter after the government
launched assistance programs, including Bt3,000 cash aid for farmers to help lift
purchasing power and reduce debt burden. The improving disposable income
arising from the expiry of the first-car scheme lock-in period would also be a positive
driver in 2H17. That is estimated to lift purchasing power by
c.Bt10,000/person/month, or Bt120bn (c.1% of total GDP) based on 1.2m cars
under the program. We forecast mild 3.0% growth in private consumption in 2017.
Private consumption index fell in January 2017 Extra Budget of Bt190bn
Source: BOT, Krungsri Securities Source: Krungsri Research
Improving farm income mainly driven by rising rubber prices

Weak consumption during the mourning period was the key drag for most retailers
in 4Q16, and has spilled over to 1H17 as most retailers expect consumption to
remain soft, and there are no visible signs of a recovery despite improving farm
income. Our analysis indicates improving farm income in recent months was
primarily due to higher rubber prices they jumped by c.80% and pushed up
average farm income by 9.1% in 4Q16 and 19.5% in January 2017. However, 73%
of the 5.9m agricultural households still rely on paddy farming for income. And
paddy prices have dropped by c.25% yoy in the past three months (major harvest
season), while output was flat. This was a major drag on overall consumption in
4Q16 and is likely to continue in 1H17.

Farm income index was driven by only some crops

25%
20%
4Q16-Jan17 were driven by rubber prices
15%
10%
5% 2Q-3Q16 were driven by cassva production
0%
-5%
-10%
-15%
-20%
Source: BOT, Krungsri Securities
Agricultural price index Agricultural production index

Growth (yoy) 1Q16 2Q16 3Q16 4Q16 Jan-17
Growth (yoy) 1Q16 2Q16 3Q16 4Q16
Price index -5.6% 5.1% 11.4% 3.5% 15.5%
Production index -7.5% -4.9% -2.0% 4.1%
Paddy -17.3% -18.5% -16.8% -26.3% -15.4% Paddy -36.2% -21.2% -20.0% 7.9%
Rubber -20.7% 0.5% 9.2% 49.6% 121.8% Rubber -0.4% -5.0% -0.6% 1.1%
Cassava -17.9% -20.0% -44.1% -36.1% -21.1% Cassava -31.7% 120.3% 137.1% 2.6%
Maize -7.2% -6.7% -4.2% -17.8% -24.3% Maize -10.5% -39.2% -8.7% 0.5%
Sugar cane -10.9% -15.2% -8.4% 14.4% 25.6% Sugar cane -6.5% -96.8% n/a -34.3%
Palm -4.6% 41.4% 74.3% 30.2% 3.8% Palm 3.2% -25.1% -10.1% 10.2%
Source: BOT, Krungsri Securities Source: BOT, Krungsri Securities
Several factors to boost private investment, but no visible impact yet

Private investment has been relatively stable since December. Although the
government has been trying to push for more private investment, the result has been
disappointing so far because of little incentive to invest as consumption and exports
remain weak while labor cost is rising and productivity is dropping. Capital utilization
has been stuck at c.60% since 2016, which discourages new investment.
Although the government has offered tax incentives such as increasing depreciation
allowance for new investments in FY17 to 1.5 times actual depreciation, it is less
than the 2.0 times offered in FY16. We see limited impact from the scheme. We
forecast private investment will grow 2.5% yoy in 2017 vs 0.4% in 2016.

Thailand GDP component

2016 2017F
GDP forecast 3.20 3.30
Private consumption 3.10 3.00
Public consumption 1.60 2.00
Private investment 0.40 2.50
Public investment 9.90 9.00
Exports (in USD terms) 0.00 1.80
Imports (in USD terms) -4.70 6.00
Current account (USD,bn) 46.40 36.90
Number of tourist arrivals (m, persons) 32.60 35.50
Headline Inflation 0.20 1.70
Core Inflation 0.70 1.00
Exchange rate (average) 35.28 35.75
Exchange rate (end of period) 35.82 36.00
Policy Interest Rate (%, end of period) 1.50 1.50
Dubai oil price (USD/barrel, avg.) 41.50 55.00
Source: Krungsri Research
Private investment index remains weak Capital utilization stuck at c.60% for a year
Source: BOT, Krungsri Securities Source: Bloomberg, Krungsri Securities
Tourism continues to recover qoq and grow yoy

In 4Q16, international tourist arrivals were flat yoy dragged by a 21% drop in
Chinese tourists. However, 2M17 data indicated recovery in the tourism sector as
the first quarter is the peak season for Thai tourism. International arrivals bounced
back and grew again by 2% yoy driven by a 33% increase in Russian tourists and
22% increase in Indian tourists. International tourism receipts also grew by 10% yoy
in January. Therefore, we expect most tourism stocks to deliver record high
earnings in 1Q17.

International tourist arrivals Inbound Chinese tourists
Source: MOTS, Krungsri Research Source: MOTS, Krungsri Research

Note : International tourists fell by 3%yoy in Feb.
Remain positive on mid- to long-term outlook on infrastructure biddings

We expect the government to tender out Bt511bn worth of new projects this year,
especially the double-track and mass transit projects. However, there are concerns
the auctions might be delayed after the government postponed tenders for five
double-track railway projects (Bt96bn) and the removal of the State Railway of
Thailand governor in a bid to improve transparency and efficiency. We expect more
clarity on the project this month as there will be a Super Board meeting on 20 March
to finalize all the issues.
Because of this, we still believe the government is committed to accelerating tenders

for infrastructure projects. Hence, our mid- to long-term outlook remain positive.

Expect Bt511bn worth of new projects to be offered for bidding this year
Tim eline of 56 Mega Projects Investm ent under Action Plan 2016 and 2017 (w orth Bt2,339bn)
Value 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F
Urgent Transport Infrastructure Developm ent
(Bt,bn) 1H 2H 1H 2H 1H 2H 1H 2H
Railway (Bt1,800.5bn)
Dual-track Trains (Bt 464bn)
- Jira to Khon Kaen 23.8
- Prachuap Khirl Khan to Chumphon 17.3
- Map Kabao to Jira 29.5
- Lop Buri to Paknampho 24.7
- Nakhon Pathom to Hua Hin 20.0
- Hua Hin to Prachuap Khirl Khan 10.2
- Paknampho to Denchai 56.1
- Jira to Ubon Ratchathani 35.8
- Khon Kaen to Nong Khai 26.1
- Chumphon to Surat Thani 23.4
- Surat Thani - Hat Y ai - Singkhla 51.8
- Hat Y ai to Padang Besar 7.9
- Denchai to Chiang Mai 59.9
- Denchai - Chiang Rai - Chiang Khong 77.0
- Banpai - Mukdahan - Nakhon Pathom 60.4
Mass Transit System (Bt 635.1bn)
- Orange Line (Thailand Cultural Center to Min Buri) 109.5
- Pink Line (Khae Rai to Min Buri) 53.5
- Y ellow Line (Lad Phrao to Samrong) 51.8
- Red Line (Bang Sue to Hua Mak and Bang Sue to Hua Lamphong) 44.2
- Purple Line (Tao Pun to Rat Burana) 128.2
- Blue Line (Bang Khae to Phutthamonthon sat 4 Road) 21.2
- Light Green Line (Damut Prakan to Bang Pu) 12.2
- Light Green Line (Khu Khot to Lam Luk ka) 9.8
- Orange Line (Taling Chan to Thailand Cultural Center) 123.4
- Airport Rail Link extension (Don Mueang-Bang Sue-Phay a Thai) 31.2
- Dark Red Line (Rangsit to Thammasar Univ ersity ) 7.6
- Red Line (Taling Chan to Siriraj and Taling Chan to Salay a) 19.0
- Light-rail transit at Phuket 23.5
High-speed Trains (Bt701.2bn)
- Bangkok to Phitsanulok (Thai-Japanese Cooperation) 224.4*
- Bangkok to Nakhon Ratchasima (Thai-Chinese Coooperation) 229.6*
- Bangkok to Pattay a (Ray ong) 152.5
- Bangkok to Hua Hin 94.7
Motorway (Bt305.0bn)
- Pattay a to Map Ta Phut 17.8
- Bang Pa-in to Nakhon Ratchasima 73.1
- Bang Y ai to Kanchanaburi 46.9
- Rama III Road to Dao Khanong and Western Outer Ring Road 31.2
- Northern expressway (Kasetsart-Nawamin Road:N2) 14.4
- Kathu to Patong in Phuket 10.5
- Nakhon Pathom to Cha am 80.6
- Hat Y ai to Malay sian border 30.5
Marine Transport (Bt87.5bn)
- Harbor Dev elopment project at Laem Chabang Port 1.7
- Railway Container Depo at Laem Chabang Port (phase1) 1.8
- Dev elopment of Laem Chabang Port (phase3) 83.0
- Ferry Ports in the upper Gulf of Thailand 1.0
Air Transport (Bt61.3bn)
- Suv arnabhumi Airport expansion (phase 2) 50.3
- Regional Airport Dev elopment (phase 1) 7.7
- Improv ement of baggage carousel sy stem at Suv arnabhumi Airport 3.3
other (Bt25.1bn) (Ex: road, logistic center and rest area f or trucks) 25.1
* Inv estment v alues subject to rev isions
Feasible study and detail design Approving and Bidding Construction (Action Plan 2016)
Feasible study and detail design Approving and Bidding Construction (Action Plan 2017)
Source: Krungsri Research

SET Index target at 1,650; Top picks are BIG, BLA, BR,
HANA, KKP, MINT, PTTGC, QH, SCI, and TU
Investors seem reluctant to chase the SET index above 1550 due to concerns over
valuation, mild market EPS growth (+8%) this year vs. 36% in FY16, and relatively
flat GDP growth of 3.3%. We expect the market to consolidate due to weak
consumption in January and likely in February (end March).
Our investment themes focus on good yield, decent growth, and cheap valuation.
Avoid stocks that are trading at high PE valuation. We continue to like commodity
as a good inflation hedge but are selective with names such as PTTGC.
We remain bullish on Thailands infrastructure investment that expands to rural

areas. This would spillover to investment and consumption, which will lift GDP
growth in the longer term. Given the rate hikes headwind, we keep target PE multiple
at 14.5x, a slight discount to historical +1.5SD of mean multiple, to reflect macro
risks. We expect consumption and loan demand to recover in 2H17 led by
accelerating infrastructure investments and expiry of the first-car scheme lock-in
period.
Comparison with regional markets (FY17F)

PER (x) PBV (x) ROE (%) Div Yield (%) EPS growth (%yoy) GDP (%yoy)
Thailand 15.0 1.7 10.6 3.0 11% 3.2
Indonesia 15.5 2.1 18.1 2.1 15% 5.0
Philippines 17.3 1.9 11.8 1.8 12% 6.8
Singapore 14.5 1.1 9.8 3.5 7% 1.5
Malaysia 16.3 1.5 10.1 3.2 7% 4.2
Japan 18.5 1.6 9.6 1.7 9% 1.0
Hong Kong 11.8 1.1 12.4 3.5 9% 1.5
China 13.6 1.3 11.5 2.0 14% 6.7
Source: Bloomberg, Krungsri Securities
Earnings performance by sector (2017F)
Source: Krungsri Securities

Thailand: Market earnings growth
Source: Bloomberg and Krungsri Securities
SET Index forward PE at year end SET Index forward PE
Source: Bloomberg and Krungsri Securities Source: Bloomberg and Krungsri Securities
SET Index forward PBV SET Index ROE

Our stock picks

M Cap Price (Bt) TP U/D EPS G% ROE (%) PE (x) P/BV (x) Div Yld (%)
BB Ticker (US$) 16 Mar (Bt) (%) 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F
PTTGC 9,208 72.3 78.0 8 25.3 17.8 13.1 14.3 9.8 8.3 1.2 1.1 5.1 6.0
MINT 4,379 34.8 43.0 24 21.9 22.7 12.9 13.2 25.9 21.9 3.0 2.8 1.2 1.4
TU 2,918 21.3 25.0 17 25.0 12.8 12.9 13.6 15.5 13.7 2.2 2.0 3.2 3.6
BLA 2,536 52.0 64.0 23 5.5 19.0 16.6 16.3 16.2 13.6 2.5 2.1 1.5 1.7
KKP 1,718 71.0 74.0 4 3.9 8.7 14.9 15.3 10.4 9.6 1.4 1.3 7.7 8.5
HANA 995 43.3 54.0 25 26.1 10.7 13.1 13.7 13.6 12.3 1.7 1.6 4.6 4.6
QH 814 2.7 3.2 20 9.1 5.9 13.9 13.9 8.1 7.7 1.1 1.1 5.8 6.2
BIG 519 5.2 7.0 36 32.5 15.7 65.0 57.8 16.2 14.0 10.5 8.1 3.7 4.3
SCI 242 11.3 15.0 33 198 80.1 23.2 35.0 17.3 9.6 3.8 3.0 2.3 4.2
BR 176 6.8 8.5 26 75.8 9.7 11.6 12.0 11.2 10.2 1.3 1.2 4.5 4.9
Source: Company data, Krungsri Securities

Sector outlook
Banking OVERWEIGHT
Expect loan demand to start improving in 2H17

We expect loan demand to start recovering in 2H17 supported by spending on
infrastructure projects, improving exports, and higher farm income. We forecast
sector loans will grow 5.1% in 2017 vs 4-6% loan growth target for most big banks.
For auto-focused banks, we forecast loan growth will turn flat or slightly positive in
2017 after contracting in the past three years. We expect auto sales to pick up
gradually this year and return to normal growth level (2x economic growth) next year
as the first-car scheme lock-in period has expired.
Key agricultural indicators Number of cars allowed to be sold between Oct 16

December 18
Source: UTCC, BOT, Krungsri Research Source: The Meteorological Department, Bank of Thailand
PromptPay would reduce fee income in the medium term

We expect large banks transactional fee income to decline gradually with the
implementation of PromptPay. However, the impact would only be visible in the
medium-term due to slow migration to the new platform from the traditional banking
system. Small banks should see limited impact from discounted transfer fees as
their fee income are generated mostly from auto sales and capital market activities.
Efficient NIM and OPEX management to support earnings growth

Although Thai government bond yields have rebounded quickly, we expect banks
to keep NIM stable yoy at over 3.0% in 2017, supported by high LDR and mild
competition in deposits. Looking forward, we expect higher funding cost to offset an
increase in asset yields.
We expect big banks to consolidate their branch networks to control cost and keep
cost-to-income ratio stable. Most banks have been investing in IT to match their
customers adoption of new distribution channels (internet and mobile banking).
SCB is one of them it closed 50 physical branches last year and redesigned
branches to be automated by including more self-service machines. We believe
KTB cannot close down its branches as quickly because its customer base is in
provincial areas.

Expect stable NPL formation and credit cost

We were not surprised with the recent increase in credit cost given its rapidly
growing consumer loans and the recent economic slowdown. Asset quality has
bottomed out and we expect stable NPL formation in 2017. Credit cost should
remain high in 1H17 but start to decline in 2H17 onwards due to a 3-6 month lagged
effect. Our credit cost assumption for FY17F is conservative at 1.42% (vs 1.44% in
2016) premised on an economic recovery and higher NPL coverage.
Top picks are TISCO and KKP, prefer BBL and SCB for big banks
Small banks will continue to outperform big banks in the next six months, led by
improving demand for HP loans, better asset quality with lower credit cost, and
decent dividend yields. We also believe small banks will experience limited impact
from lower transaction fees on PromptPay.
Our top picks are TISCO and KKP. We expect TISCOs earnings to grow 14% and
16% this year and next, supported by better loan and fee income growth after the
acquisition of Standard Chartered Bank Thailand (SCBT) retail loan portfolio and
lower provision expenses. We are positive on SCBTs transaction fee income as it
will bring in mortgage loan business to the bank. Moreover, TISCO will expand fee
income by cross-selling bancassurance and mutual fund products to 300k new
customers, starting 4Q17. We also like KKP for its rising ROE outlook and decent
dividend yield of 8-9% p.a. KKP is over-capitalized now as its Tier I ratio is 15.0%
(vs industry average of 14.0%), or 16.9% including 2H16 net profit.
For big banks, we like BBL because it is cheap from all angles and offers the
strongest earnings growth among big banks in FY17. We expect FY17F earnings to
grow 11% yoy driven by better loan growth and a small earnings base in FY16 due
to one-off expenses. We also like SCB for its superior cost control and fewer asset
quality issues.

Contractor OVERWEIGHT
Near-term sentiment is negative as investors fear further delay of

infrastructure projects, rising steel prices could pressure gross margin
The decision to delay tenders for five double-track railway projects (Bt96bn) and the
removal of State Railway of Thailand (SRT) governor under Section 44 might create
concerns in the market. However, local media reported that these actions were
taken to improve transparency and efficiency. This suggests the government
remains committed to accelerating infrastructure projects. It might affect near-term
sentiment but industry fundamentals are intact.
Additionally, rising steel prices is a downside risk to contractors gross margins.

According to the Steel Price Index by the Ministry of Commerce, prices have risen
12% since July 2016. This is another factor that would cap near-term upside.
Rising steel prices could pressure gross margin

140
130
120
110
100
90
80
70
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
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Apr-10
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Apr-15
Oct-15
Apr-16
Oct-16
Cement Index Steel Index Overall
Source: Ministry of Commerce, Krungsri Securities
Top picks are CK, STEC, and SCI for small-cap contractor
We chose CK and STEC as these two companies have good net profit track record
and will benefit from accelerating infrastructure spending. Rising steel prices and
concern over more delays in infrastructure spending would cap near-term upside,
but our mid- to long-term view on the industry is still positive.
SCI has a Bt15bn EPC contract for a 500kv transmission line project route 1 in Laos.
The company is waiting to secure two more projects: (i) PDSR project Phase 2 and
(ii) 500kv transmission line project route 2 which has total value of Bt13bn. We
estimate earnings would grow at three-year CAGR of 68% over FY15-18F, implying
only 0.7x PEG which has attractive valuation among peers.

Food & Beverage OVERWEIGHT
We upgrade the F&B sector to OVERWEIGHT on expectations the sector would

perform better than the market in the next 6-12 months as 2Q-3Q17 is the peak
season for food exports. The sector would post impressive FY17F earnings growth
of 13% vs. the market EPS growth of 10%.
Key sector drivers/drags in 2017.

This year should be another decent year for the Food sector. Drivers include (i)
8% yoy increase in food exports due to improving global economic outlook, (ii)
rising shrimp production, (iii) higher chicken and duck meat exports and prices
following tighter global supply after bird flu outbreaks in several countries, (iv) low
soymeal and corn (animal feed) prices in anticipation of larger supply in 2017, (v)
higher tapioca starch exports to China and ASEAN, with a 2 billion population, (vi)
capacity expansion/M&A, and (vii) declining salmon and tuna raw material costs
that would support demand and gross margins. The negatives include (i) excess
domestic supply of swine, and (ii) stronger THB against USD (-2% ytd to
Bt35.05/USD).
F&B sectors EPS growth F&B P/E
Selective picks in the sector

We selectively OVERWEIGHT CPF, GFPT, BR, TU, MALEE, TKN, and TWPC, and
are NEUTRAL on TVO, TACC, and CBG. Livestock producers (CPF, GFPT, and
BR) should enjoy cheaper feedstock and higher selling prices, while TU would
benefit from falling tuna and salmon raw material prices as it has fixed selling prices
6-12 months forward since late 2016. TWPC should book resilient earnings given
capacity expansion and impressive gross margins as share of HVA contribution
increases and economies of scale improve. MALEE would benefit from rising
coconut water exports, while TKN should post solid earnings growth given capacity
expansion and growing exports to China. We remain positive on CBG given its
strong regional sales, global expansion, and new product offerings through cash
vans. But concerns over weaker earnings (yoy) in 1H17 could cap upside in the
near-term.
Our top picks are TU and BR

TU: The share price is currently trading at 23% discount to peers FY17F PE of 21x
but TU will post strong FY17F EPS growth of 25% vs peers average of 12%, led by
organic growth and lower raw material prices.
BR: BRs operational turnaround will be sustainable. We expect FY17F earnings to

jump 159% yoy led by tighter global supply and VSE acquisition. Current share price
implies 11x FY17F P/E or 23% discount to peers average valuation.

Life Insurance OVERWEIGHT
End of low-bond yield period support long-term positive view

We are more positive on the Life Insurance sector following the recent surge in bond
yields. 10-year government bond yield has risen to 2.85% now from 2.66% at end
4Q16 and 2.11% at end 3Q16. A rising interest rate environment would not only
help BLA to reduce reserve expenses but also generate higher return on investment
in the long run. In term of operations, BLA could offer products at better pricing to
increase premium collection. We expect BLA to shift its policy mix to long-term
savings and protection-based policies.
Thailands 10-year government bond yield rose 55bps qoq to 2.66% at end-4Q16
and is stable at 2.70% currently
Source: Bloomberg
We have an Outperform rating for BLA with a Bt64 TP based on Bt39 EV and 18x
VNB. It implies 20x FY17F P/E and 3.1x P/BV. BLA would benefit from rising bond
yields in the long term.

Petrochemical Overweight
Expect near-term consolidation as oil prices are softening

PTTGC: The share price should consolidate as oil prices are softening. We remain
convinced of the companys strong earnings visibility. PTTGC announced it would
acquire shares and assets in six companies, which would transform PTTGC into a
major petrochemical company in Asia. Its value chain will expand to downstream
Polypropylene (PP), Acrylonitrile (AN), Mathyl Methacrylate (MMA), and
biochemical. PTTGC will pay a total of Bt17.1bn. The major assets are HMC
Polymers (HMC, Bt14.6bn) and PTT Asahi Chemical (PTTAC, Bt996m). All
transactions are expected to be completed in October. PTTGC will book equity
income from HMC (41.44%), PTTAC (50%) and PTTMCC (50%), and consolidate
PTTPM, PTTPL, and PTTME (all 100%). After incorporating these in our model,
earnings increased by 4% in FY17F (one-quarter contribution) and 9% in FY18F.
Two-thirds of the additional earnings is currently derived from HMC, Thailands

largest PP producer with 770kta capacity. It produces 300kta of propylene from
propane supplied by PTT, and buys additional 470kta from PTTGC, ROC, and
SPRC. The propane contract runs to 2024, which should ease market concerns
over the shortage of propane feedstock. We see upside potential in AN, which is
now at the bottom of the cycle (price has dropped to US$1,100/ton currently from
US$1,700 in FY13-14). MMA also commands good margins. AN and MMA are key
products of PTTAC, which reported only Bt17m profit in FY16.
Rising MEG feedstock costs to pressure near-term margin

IVL: IVLs share price will face near-term headwinds following the recent increase
in MEG prices. IVL can produce 20% or 330kta of its annual MEG requirement of
1.6mt, meaning it still needs to buy 1.3mt of MEG from third parties. The higher
MEG prices has squeezed PET margins due to the lag time in passing on
incremental costs. This would be a near-term drag on IVLs operations.
We remain optimistic of IVLs volume growth. The new 350k tons PTA capacity in
Rotterdam will be completed in mid-2017. IVL is also refurbishing a 440k ton gas
cracker in the US which will be completed at end 2017 and start commercial
operation in 1Q18. Full-year contribution from BP Decatur and Cepsa Spain and
Rotterdam expansion will lift output by 7% in FY17F, and the new US cracker by
5% in FY18F, the latter estimated to lift IVLs EBITDA by 12%.
PTA margins in Asia PTA margins in the west

US$/ton
US$/ton
130 125 260 255 255256254
255 254256
246
120 111
250 254 255
109 240
110 101 102102 101 240 243
99 100 99
97 97 98
100 9694 95 96 96 96 96
94
93 92 228 226
90 88 89 90 230
88 100 224
83 88 218
90 84 222
220 218 216 217
220 214 214 215 215 216 214
215
76 213
80 74 73
208
210
215
79 210 216
70 61 197 207
200 195
60
193
50 190
40 180
Jan-14
Jul-14
Sep-14
Nov-14
Jan-15
Jul-15
Sep-15
Nov-15
Jan-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-14
May-14
Mar-15
May-15
Mar-16
May-16
Mar-14
Mar-15
Mar-16
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
May-14
Sep-14
Nov-14
May-15
Sep-15
Nov-15
May-16
Sep-16
Nov-16
Source: Company data, Krungsri Securities Source: Company data, Krungsri Securities

PET margins in Asia PET margins in the west

US$/ton US$/ton
180 180
167 165163 167
165163
157 157 157 157
160 160
140 140
137
153 137
153
140 131 130 131 140 131 130
129
131
127 129 126126 127 126126
122 122
118 118
120 113 113 110 112 127 112 108
111 120 113 113 110 112 127 112 108
111
108 119 119 105108 103 119 119 105108
101 113 101 108 113 103
116 98 116
99 99 98
100 102 100 102
80 80
60 60
Jan-14
Mar-14
Jul-14
Jan-15
Mar-15
Jul-15
Jan-16
Mar-16
Jul-16
Jan-17
May-14
Sep-14
Nov-14
May-15
Sep-15
Nov-15
May-16
Sep-16
Nov-16
Jan-14
Mar-14
Jul-14
Jan-15
Mar-15
Jul-15
Jan-16
Mar-16
Jul-16
Jan-17
May-14
Sep-14
Nov-14
May-15
Sep-15
Nov-15
May-16
Sep-16
Nov-16
IRPC: IRPC is on track to capture the benefits of full commercial run of the UHV
unit and completed new PP capacity in 3Q17. The UHV project will upgrade fuel oil
to 1.5m tons of output, comprising propylene (320kt), naphtha (280kt), diesel
(324kt), and by-products. The discount between fuel oil and Dubai crude prices had
narrowed to -US$2 to US$4 in Jan/Feb 2017 from -US$4.0 to -US$8.0 average,
raising concerns the UHV benefits might fall short of target (of +US$1.5-2.0/bbl
GIM), but the weakness is temporary as demand for fuel oil is softer as we enter
summer. We expect earnings to be soft in 1Q17 as IRPC will shut down its refinery
and petrochemical plants for the whole of February. We expect PP margins to widen
in subsequent months as crude oil prices are stable, and should stay strong in 2017.
Overweight the sector; PTTGC is our top pick for exposure to oil prices
PTTGC is gradually evolving into PTT Groups petrochemical flagship company.
Our TP is pegged to 6.0x FY17F EV/EBITDA, a slight discount to its 7-year historical
multiple to reflect operating risks following three unplanned shutdowns last year.
However, operating rates would be higher this year and there are no planned
shutdowns.

Property OVERWEIGHT
Key economic indicators support property demand

We monitored three economic indicators that are leading indicators for property
demand and purchasing power: GDP growth, consumer confidence (CCI), and
household debt. In terms of GDP, the positive momentum should continue in FY17F.
GDP should grow by 3.3% in FY17F vs 3.2% in FY16, based on Krungsri
Economists view. Given presales growth has 51% positive correlation to GDP
growth, the latter should to help drive property demand in FY17. Moreover,
completed and unsold inventory should have peaked and will start to decline
gradually as a better economy should help to drive take-up rates. This implies the
oversupply concern should ease.
Expect CCI to trend up Household debt to GDP starting to peak
Source: UTCC, Krungsri Securities Source: BOT, Krungsri Securities
Positive GDP growth momentum should help drive presales Unsold supply situation is getting better
200.0% 25.0% thousandunits
20.0% 180
150.0%
15.0% 150
100.0%
10.0%
120
50.0% 5.0%
90
0.0%
0.0% 60
-5.0%
-50.0% 30
-10.0%
0
-100.0% -15.0%
2009
2010
2011
2012
2013
2014
2015
2016F
2017F
2018F
2019F
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
Presales growth (Y-o-Y) GDP growth (Y-o-Y) (RHS)

Detached Townhouse Condominium
Source: BOT, Company data, Krungsri Securities Source: AREA, Krungsri Research
More launches would help boost presales

In the past three years, there were fewer new launches in Bangkok Metropolitan
Area (BMA), especially condominium projects, because of weak demand. Several
developers have also postponed new launches from 4Q16 to 1Q17 due to the
mourning period. With more aggressive new launches in FY17F at Bt221bn (+38%
yoy, we expect presales should recover in FY17 to Bt200bn (+22% yoy).

Expect FY17F new launches to surge by 38% yoy ..leading to 22% presales growth
Unit: Btm FY16 FY17F % change Unit: Btm FY16 FY17F % change
ANAN 20,693 41,841 102% ANAN 25,175 30,333 20%
AP 19,090 35,000 83% AP 22,365 26,000 16%
LH 18,600 14,900 -20% LH 23,908 26,000 9%
LPN 8,700 20,000 130% LPN 8,500 20,000 135%
PSH 59,700 60,800 2% PSH 44,414 52,900 19%
QH 9,000 11,500 28% QH 15,300 18,000 18%
SPALI 24,120 37,200 54% SPALI 24,100 27,000 12%
Total 159,903 221,241 38% Total 163,762 200,233 22%
Aggressive expansion of mass transit system a new growth driver

The growth of Thailands mass transit system has been capped in the past few years
by political uncertainty. However, the seemingly more stable political climate under
the military government has resulted in the acceleration of new mass transit
projects. The government had announced the winning bidders for the Orange, Pink
and Yellow lines in December and the construction of these projects would start in
2H17. There will be other projects such as the Orange (West side), Purple and
Green line extension which the government wants to offer for bidding this year. The
expanding mass transit network will open up new property hotspots, which would
be the new growth engine for property developers as there would be more land
available at reasonable prices.
Top picks are QH and SPALI

We estimate sector earnings will grow by 11% to Bt32bn in FY17F, driven by ANAN
(+31% yoy), AP (+25%), PSH (+20%) and QH (+12%). We removed LH as a top
pick and replaced that with QH. We like QH because its property business earnings
have bottomed-out and downside is limited as that business is trading at 3.4x
FY17F PE, its lowest in 12 years. The stock also offers decent dividend yield of
5.8% in FY17F. We like SPALI for strong revenue visibility in FY17F and FY18F at
60% and 43% of our revenue forecasts, respectively.

Tourism OVERWEIGHT
International tourist arrivals should recover in 1Q17

We are positive on the Tourism sector although 4Q16 earnings were soft due to
the mourning period and fewer Chinese tourists following the crackdown on zero-
dollar tours. In 4Q16, international tourist arrivals was flat yoy, dragged by a 21%
yoy drop in Chinese tourists. However, this is an opportunity to accumulate tourism
stocks to capture the recovering international arrivals. Further, 1Q is peak season
for Thai tourism. International arrivals had bounced back in 2M17, registering 2%
yoy growth driven by a 33% increase in Russian tourists and 20% increase in
Indian tourists. Chinese tourist growth has remained negative, but showed
improving trend (-7%yoy in 2M17 vs -21%yoy in 4Q16). International tourism
receipts also grew 10% yoy in January.
Promising outlook for hotel and restaurant business in 1Q17

Hotel operators, including CENTEL, MINT and ERW, have signaled to us RevPar
growth would be recovered in 1Q17. The restaurant business in Thailand is also
showing positive momentum because operators can resume advertising and
promotions after the mourning period. Tourism stocks will also benefit from the
governments decision to extend visa incentives, waive visa fees at Thai
embassies and reduce visa-on-arrival fees to Bt1,000, by six months to August.
Therefore, we expect most tourism stocks to deliver record high earnings in 1Q17
Valuation is attractive; top picks are MINT

MINT is trading at 27x FY17F P/E, in line with regional peers average. But it
deserves a premium for its diversified revenue base (50% of revenue is derived
from international operations). We also like AOT and ERW. AOT is trading at only
26x FY17F PE. As it operates a near-monopoly business, it would be the first
among Thailand tourism stocks to gain from a recovering tourism industry.
Concerns over the Treasury Department raising rental rate for state land are
excessive. We estimate state land rental would increase by only Bt0.7-0.9bn in
FY17F, which would reduce earnings by only 4%. Meanwhile, ERW will be the
largest beneficiary of Thailands recovering tourism industry as 98% of its revenue
is generated from hotels in Thailand. ERW is trading at only 24x FY17F PE and
11x FY17F EV/EBITDA, while it offers 34% earnings growth in FY17F.
Thailand tourist arrivals Inbound Chinese tourists

(m.passenger) (tourists )
1,000,000
3.3 3.2
3.1 3.1 900,000
3.0 2.9 2.9
3.0
2.9 800,000
2.8 2.6 3.0 700,000
2.5 2.5 2.8
2.4 2.4 600,000
2.7 2.6
2.6 2.6 2.3
2.6 2.5 500,000
2.3 2.4 2.4
2.3 2.3 2.3
400,000
2.2
2.2
2.1 2.1 300,000
2.0 2.0
1.8 1.9 1.9 200,000
1.9
1.7 100,000
1.3 1.5 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2015 2016 2017 2014 2015 2016 2017
Source: MOTS, Krungsri Securities Source: MOTS, Krungsri Securities

Airline NEUTRAL
Yields should improve from 1Q17 onwards

We have a neutral rating for the Airline sector as passenger yields were weaker-
than-expected due to high competition. Passenger yields at AAV, BA and THAI had
fallen by 8-10% yoy in 4Q16, reflecting the mourning period effect, crackdown on
zero-dollar tours and competition on Indochina (AAV and BA) & international (THAI)
routes. However, the first two factors were one-time events and yields will improve
from 1Q17 onwards driven by recovering Chinese tourists and domestic passenger
numbers. Competition on Indochina and international routes will continue to drag
yields.
Rising fuel prices have less impact on airlines because of fuel hedging
After OPEC agreed to cut oil output, jet fuel price surged 8% from US$57/bbl to
US$61/bbl. This will hurt airline stocks but the actual impact is less severe because
of fuel hedging activities for 2017. AAV has hedged c.74% of FY17 requirement at
average cost of US$62/bbl while BA has hedged c.47% at US$63/bbl. Meanwhile
THAI has hedged c.57% using collar hedging at US$40-60/bbl. Our sensitivity
analysis suggests that everyUS$1/bbl increase in fuel price would reduce AAVs
earnings by 0.9%, BAs by 1.0%, and THAIs by 8.4%.
Opportunity to accumulate on weakness

In the past four months, airline stocks have underperformed the SET Index by 8.4%.
This suggests negative news including crackdown on zero-dollar tours, fewer
tourists during mourning period, rising fuel prices and increase in excise tax have
been mostly priced in. Valuations remains attractive. Currently, airline stocks under
our coverage are trading at 12x FY17F PE compared to regional average of 26x.
Our top pick is AAV, while BAs airline operation is trading at only 9x FY17F PE and
the company offers a well-diversified revenue base.
Our top pick is AAV; leading market share with competitive cost structure
AAV is our top pick for its leading market share (c.30%) and competitive cost
structure which gives it flexibility to compete with other airlines either by keeping
yields low to weaken competitors or raising fares to get higher yields. Moreover,
AAV is most leveraged to recovering inbound Chinese tourists because it has the
largest exposure to Chinese tourists (c.26%) among domestic LCCs.
AAV is now trading at 13.1x FY17F PE, at a discount to regional peers average of
21x. We expect earnings to grow 17% yoy in FY17F and 22% yoy in FY18F led by
aggressive network expansion and a competitive cost structure. There is upside risk
from higher-than-expected passenger yield due to faster-than-expected recovery of
inbound Chinese tourist numbers.

Commerce NEUTRAL
Rice and rubber prices are pressured by liquidation of huge stockpile by Thai
government
We had mentioned earlier in this report that limited farm income would cap private
consumption growth. We expect the price of rice to be stable at current levels as the
Thai government has liquidated 10.1m tons of the national stockpile since 2014,
leaving 6.5m tons stockpile. Meanwhile, the government plans to auction off up to
3.7m tons starting March. This would continue to pressure rice prices, like what
happened with rubber products when the government started to rapidly liquidate the
rubber stockpile this year. And, given the current huge global rice stockpile, there is
limited upside to rice prices. Also, we cannot see any major price catalyst if there is
no populist policy, like the rice-pledging scheme which set buying prices at 40-50%
higher than the prevailing market price in late 2011.
Meanwhile, the Rubber Authority of Thailand (RAOT) is stepping forward to liquidate

the last lot of 100k tons of rubber by auction after liquidating 200k tons in the past
two months. They had sold c.100k tons at each auction at US$1.97 and US$2.06
per kg, but after news last week of another auction, rubber price has dropped to
US$1.93 (the same level as end FY16). We believe these two factors would cap
farm income growth in 1H17.
Global rice supply remains in surplus, inventory at 10- Rice price has yet to recover due to high global inventory
year high
500 130 11,000
480 120 10,500
10,000
460 110
9,500
440 100
9,000
Baht per ton
420 90
8,500
400 80
8,000
380 70
7,500
360 60 7,000
6,500
6,000
Production (tons) Consumption (tons) Ending stocks (RHS)
1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17
Private Consumption Index (PCI) has yet to pick up PCI growth vs Farm income growth
20% 15.0% 5.0%
10.0% 4.0%
15%
5.0%
3.0%
10%
0.0%
2.0%
-5.0%
5%
1.0%
-10.0%
0%
-15.0% 0.0%
-5% -20.0% -1.0%

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Farm Income Growth PCI Growth (RHS)

Focusing on lifting profitability and new store expansion, but expect stable
top-line growth as consumption remains soft
This year, most retailers in our coverage including CPALL, ROBINS, HMPRO will
continue to rely on the same growth strategies as the last two years - adding new
stores and trying to enhance margins - to drive earnings as domestic sentiment has
been weak since FY14. However, expansion in the hypermarket and department
stores segments could create cannibalization effect on existing stores, especially in
Bangkok and major cities, while in rural areas they could be dragged by weak
purchasing power due to lower income. Hence, we expect stable top-line growth in
the commerce sector.
Store network of retailers in our coverage

2014 2015 2016 2017F 2018F 2019F
CPALL 8,127 8,832 9,542 10,242 10,942 11,642
MAKRO 82 98 115 125 135 145
HMPRO 76 84 93 101 109 117
HomePro (including Malaysia) 72 77 82 87 92 97
Mega Home 4 7 11 14 17 20
ROBINS 39 42 44 47 50 53
BIGC (hypermarket) 123 125 131 140 145 150
E-commerce is the key constraint in the longer-term

We believe physical retail stores will not disappear so soon in Thailand since most
retailers are still sticking to expansion-led growth strategies for the next two years,
and a large segment of the population is still not IT literate or do not have regular
internet access. We believe if the online-shopping trend continues unabated in
Thailand, many shopping centers will face formidable challenges. In the longer-term
e-commerce would have an impact on landlords and tenants; it would give tenants
greater bargaining power, which would lead to slower rental growth as retailers
move to the online platform. However, most retailers in our coverage have started
online shopping platforms to catch this trend and meet the increasing preference for
online shopping, but their online sales are generating minimal revenues at less than
1% of their total sales. We believe the convenience-store format will be more
resistant to the e-commerce threat in the long run compared to other formats,
supported by the offering of everyday items, RTE food, and easily-accessible
presence.

Maintain NEUTRAL rating for sector; despite lingering weak consumption,

earnings growth will remain decent; CPALL is our top pick
We are neutral on domestic consumption as we have yet to see a positive catalyst.
The CVS format would continue to book more resilient SSS than other formats
under slow economic conditions, and new store expansion remains robust.
CPALL has the clearest growth plan for the next three years, supported by new
store expansion and higher margins from the sale of RTE products. Meanwhile, the
management has denied it was buying assets overseas, citing a stretched financial
position. CPALL is sticking to its plan to open 700 new stores this year and take its
network to 10,242 stores by end FY18.
Moreover, its cash & carry business (MAKRO) also registered robust SSSG in 4Q16
of 3.9% and drove FY16 SSSG to 4.1%, beating other retailers. MAKROs GPM has
been improving since 2Q16 due to less intense competition. Going forward, MAKRO
will start to expand overseas this year, specifically in Cambodia and India, using the
cash & carry format. This would increase SG&A expenses for MAKRO and its
overseas units could contribute losses initially due to startup costs for its
headquarters. However, its domestic earnings will continue to grow driven by
expected 3% SSSG, 10 new store openings, and higher GPM in FY17-19F with
increasing sales of non-food and dry food products which command higher margins
than fresh food.

Consumer Finance NEUTRAL
MTLS/SAWAD Strong credit growth outlook

We expect demand for motorcycle, auto and land title loans to remain strong. Both
MTLS and SAWAD will be able to grow their loan portfolios supported by aggressive
branch network expansion. We forecast 50% and 30% loan growth for MTLS and
SAWAD, respectively, in 2017. Margin-wise, we expect higher funding cost to
increase by 30-50bp for MTLS/SAWAD as bond yields have rebounded sharply
from a record low. However, there is limited impact on NIM because this business
commands relatively good margins (25-30% loan yield vs 3-4% funding cost).
MTLS: Loan growth to remain strong SAWAD: Expect loan to grow 30% yoy in FY17-18F
On asset quality, NPLs should remain manageable with efficient debt collection.
MTLS has performed better than SAWAD in terms of lower NPL ratio and stronger
reserves. We have an Outperform rating for MTLS (rising ROE outlook, good
efficiency and strong asset quality) and SAWAD (attractive valuation, strong
earnings growth).
KTC/AEONTS - Credit card and personal loans to slow down in 1H17

The Bank of Thailand reported that personal loans fell 1.8% mom, mostly from lower
loan balances at non-banks in Jan 2017. Credit card spending grew at a slower rate
of 5.6% yoy in January after the expiry of government tax incentive in Dec 2016.
We forecast the industrys credit-card and personal lending will grow by 7% yoy in
FY17, which is twice the forecast economic growth for this year.
We have a Neutral rating for both KTC (stock is trading at fair value as share price
has risen 32.5% and outperformed the market by 12.9% in the past year) and
AEONTS (attractive valuation but no near-term catalyst).

Electronic - NEUTRAL
Global semiconductor industry to grow at the fastest pace since 2014

This year would be an interesting year for the semiconductor industry as
economies in major consumer markets, such as the US, picks up. Latest US data
show a drop in the unemployment rate from almost 7% in 2014 to 4.6% currently.
Higher personal income would also lift private consumption expenditure, including
spending on consumer electronics, which would benefit the semiconductor
industry. Meanwhile, World Semiconductor Trade Statistics show the global
semiconductor industry would grow by 6.5% in 2017, in line with Gartner which
expects the industry to grow by 7.2%. Growth would be driven by major products
such as sensors, analog, and memory.
Global semiconductor market to grow by c.7% in 2017

400
350
300
250
200
150
100
50
2017F
2018F
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Global Semiconductor Sales (US$ bn)
Source: SIA, WSTS, Krungsri Securities
Semiconductor Industry Association (SIA) reported the industry registered

US$339bn sales in 2016 (+1.1% yoy), an annual record for the industry. The fastest
growing product was sensors, which grew 22.7% in 2016. January data reveal
global semiconductor sales had surged 14% yoy to US$30.6bn, the highest January
sales and largest yoy growth in over six years. It was 1% lower than December 2016
sales due to seasonality. We believe semiconductor sales will continue to trend up
supported by the improving global economy.
Global semiconductor sales by month HANA: sales has 90% correlation with billing data
32 100.0 200.0
90.0 180.0
28
160.0
80.0
24
140.0
US$ bn
US$ bn
US$ m
70.0
20 120.0
60.0
100.0
January sales were in record territory at US$30.6bn
16
50.0 80.0
12 40.0 60.0
May-10
May-15
Jan-07
Jun-07
Jan-12
Jun-12
Jan-17
Feb-09
Mar-11
Feb-14
Mar-16
Apr-08
Jul-09
Oct-10
Apr-13
Jul-14
Oct-15
Nov-07
Sep-08
Dec-09
Aug-11
Nov-12
Sep-13
Dec-14
Aug-16
Semiconductor Billing Semiconductor Billing HANA' sales (RHS)
Source: SIA, Krungsri Securities Source: SIA, Krungsri Securities

Automotive sector remains key growth segment, which will benefit KCE, but
intense competition and higher raw material prices would crimp GPM
The global automotive PCB market was valued at US$5.7bn in 2016, and is
expected to grow by 8% in 2017 to US$6.2bn. Asia is the largest PCB market at 80-
90% of the total value led by China and Taiwan, but both are losing cost advantage
due to rising labor costs. This would help KCE to gain market share as its customers
prefer a diversified supply chain. However, there is rising competition from Chinese
and Taiwanese PCB makers which are shifting to automotive PCB from other
segments due to stable demand and larger margins.
Commodity prices are strengthening globally, and one them is copper a key raw
material for the PCB industry. This would hurt all PCB makers. Although KCE could
raise selling prices to partially soften the impact, it would eventually hurt GPM.
Furthermore, some high-grade copper suppliers have switched part of their
production capacity to produce batter foil for electric vehicles, which would result in
a shortage of standard copper foil for the PCB market. Rising copper prices have
also pushed up copper foil prices, forcing PCB makers to pay higher prices to secure
the products. This would hurt GPM if KCE cannot reduce costs meaningfully. Hence,
we still see limited upside to KCEs FY17F earnings, which would cap share price
performance until the company can prove that rising raw material prices have
minimal impact on GPM.
KCE: GPM has 90% negative correlation with LME copper price
10,000 40%
9,000 35%
8,000
30%
7,000
US$ / ton
25%
6,000
Upturn GPM after 20%
5,000 production line refurbishment
4,000 15%
3,000 10%
LME Copper price KCE's GPM (RHS)
Source: LME, Company report, Krungsri Securities

Key players in smartphone market have changed, should benefit HANA

IDC reported China smartphone shipments grew 19% yoy and 17% qoq in 4Q16,
which expanded the market by 9% in 2016. The top four Chinese brands - OPPO,
Huawei, Vivo, and Xiaomi have kept their respective market shares, but their
aggregate market share has increased to 57% from 46% the year before. Increasing
local acceptance of Chinese brands is driven by better product features at affordable
pricing. Shipments by OPPO, Huawei, and Vivo the top three - surprisingly surged
122%, 22%, and 97%, respectively, in 2016. This is a good development for those
brands, and we believe they will continue to gain market share in China and new
growth markets such as India. Note that Chinese consumers prefer dual-camera
phones because of the selfie trend, and these require more sensors in the phones.
We believe Chinese smartphone brands will expand aggressively in international

markets to gain global market share after strong successes in the local market. India
is a key target as the country has the second largest population in the world.
Smartphone sales in India grew rapidly by 18% yoy in 2016, outpacing the global
average of 6.9%. In 4Q15, Indian brands such as Micromax, Intex and Lava took
second, third and fifth place, and together captured almost 30% of the local market.
But a year later, all three brands have dropped out of the top five because Chinese
rivals offered more competitive pricing and had larger marketing budgets. In 4Q16,
four of the top five smartphones brands in India were Chinese brands - Xiaomi,
OPPO, Lenovo, and Vivo - with a total market share of 36%. In the lead was
Samsung with 22% market share.
This development led us to pick HANA (OUTPERFORM, Bt54 TP) as our top pick.
HANA derives 37% of total sales from the telecom segment, mostly for smartphone
products. And, its end users are well-known names such as Apple, Samsung,
Lenovo, Huawei, OPPO, Vivo, and Xiaomi.
Global smartphone shipments (m units)

2016 2015 2016 2015
Yoy
No. Brands Shipment Shipment Market Market
growth
Volume Volume Share Share
1 Samsung 311.4 320.9 -3% 21% 22%
2 Apple 215.4 231.5 -7% 15% 16%
3 Huawei 139.3 107 30% 10% 7%
4 OPPO 99.4 42.7 133% 7% 3%
5 Vivo 77.3 38 103% 5% 3%
6 Others 627.8 697.1 -10% 43% 49%
Total 1,470.60 1,437.20 2% 100% 100%
Source: IDC, Krungsri Securities
China smartphone shipments (m units)

2016 2015 2016 2015
Yoy
No. Brands Shipment Shipment Market Market
growth
Volume Volume Share Share
1 OPPO 78.4 35.3 122% 17% 8%
2 Huawei 76.6 62.9 22% 16% 15%
3 Vivo 69.2 35.1 97% 15% 8%
4 Apple 44.9 58.4 -23% 10% 14%
5 Xiaomi 41.5 64.9 -36% 9% 15%
6 Others 156.7 173.4 -10% 34% 40%
Total 467.3 430 9% 100% 100%
Source: IDC, Krungsri Securities

PC shipment is expected to bottom out

Tech market specialist Gartner predicts the device market will bottom out in 2017
led by stronger sales of ultra-mobile PC and the adoption of Windows 10 in the
enterprise segment as inventories of Windows 8 PCs clear, and large businesses
in developed markets would be moving to Windows 10 through to 2018. Also, more
affordable hardware and an improving US economy would encourage consumers
to spend more on PC and other technology devices.
HANAs US dollar sales have been shrinking in the last five quarters since 3Q14,
dragged by weak sales for PCBA as PC sales had been slow. Although HANA has
diversified to other business segments, they had not been able to fully offset the
impact of weak PCBA sales. But, there was decent progress in 3Q16 with total sales
growing for the first time in five quarters while contribution from the PC sector has
fallen to 13% of total sales compared to 15% in 3Q15 and 33% in 2014, suggesting
the down cycle has ended.
PC shipments are expected to bottom out

Device Type 2013 2014 2015 2016 2017F 2018F 2019F
Traditional PCs 296 277 244 219 205 198 193
Ultramobiles (Premium) 22 37 44 49 61 74 85
PC Market 318 314 288 268 266 272 278
Ultramobiles (Basic) 210 227 196 168 165 166 166
Computing Devices 528 541 484 436 431 438 444
Mobile Phones 1807 1879 1917 1,888 1,893 1,920 1,937
Total Devices Market 2,335 2,420 2,401 2,324 2,324 2,358 2,381
Source: Gartner, Krungsri Securities
Weaker Thai baht would benefit the sector, and HANA the most
HANA will be the largest beneficiary of a weaker Thai baht among stock in our
Electronics sector. The Fed rate hike is likely to cause the baht to depreciate against
the US dollar, and all HANAs sales are in USD while 60% of its production costs
are in USD. HANA currently has a US$140m currency hedging position, which
accounts for only c.25% of its annual sales or 50-60% of its total USD exposure.
Our sensitivity analysis shows that if the baht depreciates by 1% (base case is
THB35.5/USD), FY17F earnings would increase by c.3.0%.
Maintain NEUTRAL rating for the sector due to stretched valuation, but HANA
is our top pick because it offers promising outlook at the cheapest valuation
The sector is trading at 17x FY17F PE or +1.5SD of its 6-year average multiple,
while earnings growth remains tepid and would decelerate compared to last year,
due to company-specific factors. However, we remain convinced HANAs earnings
are on track to grow 26% this year driven by rising global semiconductor sales. IC
sales will continue to rise led by larger orders from the telecom segment, which
prompted HANA to expand capacity, to be completed in 2Q17. Meanwhile, demand
for PCBA products should stabilize and possibly recover on expectations of an
improving PC market.
HANA is trading at only 14x FY17F PE vs 17x sector average. Our TP is pegged to
17x FY17F PE, in line with sector average and 10% below its high trading multiple
during the industry upturn in FY14 (19x), while FY17F earnings base is 25% larger.
We still see earnings upside from better than expected sales and GPM, and our
conservative assumption of THB35.5/USD. A THB1/USD deviation from our base
case would swing earnings by c.3%. The better earnings momentum and improving
GPM will lead consensus to rerate the stock.

Energy NEUTRAL
Upstream
Upstream E&P: US commercial crude inventory had risen by 8.2m bbl last week
and drove up stockpile to a record high of 528m bbl. This has raised fears rising
supply would push down crude prices. However, we see this as a temporary price
correction as OPECs compliance with pledged supply cuts remained high at 140%
in February.
PTTEP guided gas price and unit cost would be US$5.1/mmbtu and US$31/boe in
1Q17, and US$5.3/mmbtu and US$30-31/boe in FY17. This is based on assumed
Dubai crude price at US$49/bbl. Guidance for gas price is slightly below our
assumption of US$5.6 for FY17 as we assumed US$55/bbl oil price. Unit cost
guidance is in line. The company has hedged 9m bbl of liquid at US$57-59 at end
2016. Current oil prices imply PTTEP should book hedging gains in 1Q17. We have
an UNDERPERFORM rating as PTTEPs valuation is stretched at 17.8x FY17F PE
vs regional peers CNOOCs 14.4x and 10.5x for ONGC.
Refinery: Despite solid FY16 results, we are cautious of the outlook for refining
because of weakening GRM. We expect TOPs share price to lose momentum in
2017. TOPs earnings will decline yoy due to smaller stock gains (Bt6.1bn in FY16),
narrower PX margins, absence of NRV (Bt1.0bn in FY16), and a higher effective tax
rate. TOP has Bt1.9bn BOI tax privilege but most had been utilized in FY16. Hence,
effective tax rate would increase to 20% statutory rate this year. Earnings
contribution from Aromatics should soften yoy as Reliance will add 1.2mt of PX
capacity in 2Q17 and PetroRabigh 1.5mt by mid-2017; these represent 8% capacity
addition in Asia vs. 4.4% demand growth in 2017, which will pressure PX margins

Healthcare NEUTRAL
EBITDA margins of big cap hospitals will be under pressure
We see slower growth of international patient revenues at big-cap hospitals. In
2016, international patient revenue grew only 5% for BDMS (vs 17% CAGR over
2011-2015), while it was flat for BH (vs 16% CAGR over 2011-2015). This was due
to fewer high-intensity patients from the Middle East. Both hospitals expect to
capture more CLMV and Chinese patients to offset the impact. However, Asian
patients are normally lower-intensity cases compared to Middle East patients.
Therefore, we expect EBITDA margins for big-cap hospitals to be stable, at best.
Further, the opening of Wellness Clinic in 4Q17 should pressure BDMS margins as
it would take 2-3 year to breakeven.
Prefer mid-small cap hospitals as they focus more on cash patients

Mid-small cap hospitals are trying to capture more cash patients because they
generate higher margins than SS patients. BCH, CHG, LPH and VIBHA have
several expansion projects during 2017-2019 to capture more cash patients. WHO
estimated the number of IPD beds per 10,000 population in Thailand was only 21 in
2013 compared to the global average of 26. This implies room for expansion in the
healthcare industry. Further, there is upside in Social Security revenue as the Social
Security Office might increase payment this year, the first since 2012. We expect
c.5% increase in both fixed payment and compensation rate for high-intensity cases.
In our coverage, LPH would be the top beneficiary because it has the largest
exposure to SS revenue, at 41% of its total revenue. Next are BCH and CHG with
c.35% of revenue. Our sensitivity analysis suggests a 5% increase in the SS
payment would lift earnings by 13% at LPH, 10% at BCH, 9% at CHG, and 6% at
VIBHA.
Selective picks
Healthcare stocks failed to deliver earnings growth in 4Q16. However, we believe
this was mainly due to the high base in 4Q15 because of dengue and influenza
outbreaks, and earnings should recover and register yoy growth in 1Q17. Market
should give a premium to healthcare stocks that can deliver strong earnings growth.
Our top picks are BCH, LPH and VIBHA, which offer FY17F EPS growth of 27-28%
(vs 18% average for peers).

Media NEUTRAL
Ad spending recovery and digital TV rating outlook priced in

We have a neutral rating for the Media sector as ad spending recovery and strong
rating outlook for top digital TV channels have been priced in. The sector has
outperformed the market by 2% YTD led by WORK (+26% YTD), MONO (+27%
YTD), RS (+17% YTD) and PLANB (+8% YTD). As we expected, total ADEX is
showing signs of recovery with -7% growth in Feb-17 from -45% in Oct-16. In store
ADEX offered the strongest growth (+40% yoy) in Feb-17, followed by cinema ADEX
(+26% yoy). Meanwhile, outdoor and digital TV ADEX grew 17% yoy and 6% yoy
respectively. We expect this trend to continue and ADEX growth should recover
from -12% in FY16 to +3% in FY17F thanks to the low base last year and improving
private consumption expenditure.
TV vs. Cinema vs. Outdoor ADEX growth TV rating (15+, 18 hours)

TVR
5.0
CH7 CH3 HD WORKPOINT MONO ONE CH8
Analog TV growth (yoy) Digital TV growth (yoy)
% 4.5
Cinema Growth (yoy) Outdoor (yoy)
70
4.0
50
35.2 3.5
30 25.8 3.0
2.994
2.841
18.6
10 5.7 2.5 2.562
2.289
-10 (18.9) (8.9) 2.026

2.0
1.882
1.668 1.913
-30 1.5 1.490
1.235 1.482
(47.8) 1.034
-50 1.0 0.858
(60.4) 0.772
-70 0.5 0.718 0.679 0.686
0.417
Oct-15
Nov-15
Dec-15
Oct-16
Nov-16
Dec-16
Sep-15
Jan-16
Mar-16
Apr-16
May-16
Jun-16
Aug-16
Sep-16
Jan-17
Feb-16
Feb-17
Jul-16
0.0
Apr-14
May-14
Jan-15
Apr-15
May-15
Jan-16
Apr-16
May-16
Jan-17
Jun-14
Jul-14
Aug-14
Sep-14
Aug-16
Oct-14
Nov-14
Dec-14
Feb-15
Mar-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Feb-16
Mar-16
Jun-16
Jul-16
Sep-16
Oct-16
Nov-16
Dec-16
Feb-17
Source: AAT and Krungsri Securities Source: AGB Nielsen
GDP vs. All TV vs. total ADEX growth

GDP growth Total ADEX growth All TV ADEX growth
%
25.0
20.0 17 18
15.0
13 11 10
10.0
3 4 3 3 3
5.0
1 3
2 5 3 (0)
0.0
2011
2017F
2018F
2019F
2002
2003
2004
2005
2006
2007
2008
2009
2010
2012
2013
2014
2015
2016
-5.0 (3)
-10.0
(12)
-15.0
-20.0
Source: AAT and Krungsri Securities

WORK and PLANB are top beneficiaries of ADEX recovery, but current
valuation is fair
WORKs rating improved to 1.49 in Feb-17 from 0.77 in Nov-16 (+93%), the
strongest recovery among TV industry. Its average primetime rating rose a notch to
second place last month with a 3.69 rating, beating Ch3 at 3.32. This suggests
upside to its ad rate and CPRP to catch up with Ch3. Meanwhile, PLANB with c.70%
market share in digital billboard is a prime beneficiary of the anticipated upturn in
OOH spending. However, current valuation of both stocks are at fair and we prefer
to wait for a lower entry price. There is upside risk if CPRP adjustment and ADEX
recovery are stronger than expected.
Our top pick is MAJOR for its strong movie line-up coupled with resilient
cinema ad spending
MAJOR revealed strong admission revenues in Jan (+50% yoy) and Feb (+20%
yoy) and this trend is expected to continue in March led by Logan, Kong: Skull
Island, Beauty & the Beast and Oversized (Thai movies), while 2Q17 should be the
peak quarter this year driven by Fast & Furious 8 and Transformer 5. Meanwhile,
advertising revenue is expected to grow 10% yoy as cinema ad spending had been
resilient relative to other mediums (+6% yoy vs -12% total ADEX growth in 2016).
MAJOR is now trading at 26x FY17F PE, in line with its 5-year average PE multiple,
while its earnings will grow 47% in FY17F and 18% in FY18F vs 9% p.a. average in
the last five years. This could lead to a rerating. We recommend to accumulate the
stock to capture strong box office revenues in FY17 and potential upside from
better-than-expected Thai movie revenues.

Renewable Energy NEUTRAL
ALR issue remains an overhang

The Administrative Courts recent decision to disallow Thep Sathit wind farm from
developing on Agricultural Land Reform (ALR) area had raised fears that decision
would affect all renewable energy projects that will be located in ALR areas. In our
coverage, RATCH and EA have plans for projects in ALR areas. RATCH has 20%
equity stake in Huay Bong 2&3 with total equity capacity of 41.4MW, but that is
relative small at 0.6% of its existing capacity of 6,443MW. EA would be significantly
affected. Its plan to develop the 260MW Hanuman wind farm (39% of total capacity)
in ALR areas with a target COD of mid-2018. It is currently awaiting clarity from
related authorities. EA is also considering an alternative location, but this may delay
COD by a few quarters. We value EAs share of the Hanuman project at Bt9.2/sh.
If the wind farm is to be moved to a new location, rental cost would increase and
yields would be lower. Assuming capacity factor would drop by 5ppt to 21% and
rental cost doubles, the valuation of Hanuman would drop to Bt6.7/sh.
Impact of ALR issue on stocks under our coverage

Total equity Wind capacity % of total Downside
Stock COD TP
capacity on ALR area capacity to our TP
EA 664 260 39% COD 52 0%

RATCH 6,443 41 0.6% Mid-2018 28 -33%
Proposes tenders for hybrid renewable energy projects

In February, the National Energy Policy Council (NEPC) agreed to replace 400MW
biomass/biogas generation projects with 569MW of hybrid renewable energy
projects. The program comprises of 300MW SPP Hybrid Firm projects (can use all
renewable energy) and 269MW VSPP Semi-Firm projects (use only biomass/biogas
as fuel). NEPC plans to announce related new rules and criteria and start to receive
bids for the hybrid renewable energy PPAs in 2H17.
Tender program for Hybrid renewable energy projects

300MW SPP Hybrid Firm 269MW VSPP Semi-Firm
Contract type Firm Semi-Firm
Capacity factor 100% during Peak Firm: 4 months (March-June)
Capacity factor 65% during Off-Peak Capacity factor 100% during Peak
Capacity factor 65% during Off-Peak
Non-Firm: 8 months
Type of fuel All renewable energy with energy storage Biomass/biogas with energy storage
FiT: competitive bidding
FiT: competitive bidding Biomass fuel: Bt4.24-4.82/kWh
FiT
From Bt3.66/kWh Biogas fuel (waste water): from Bt3.76/kWh
Biogas fuel (energy crop): from Bt5.34/kWh
Condition No fossil fuel No fossil fuel
SCOD 2020 2019
Source: NEPC, Krungsri Securities

Selective: top picks are TPCH and GUNKUL

In the renewable energy sector, TPCH will be the top beneficiary of the proposed
tenders for hybrid renewable energy projects. It stands a better chance of securing
PPAs under the SPP 300MW Hybrid Firm quota than for other renewable energy
sources (solar, wind and waste) with energy storage, as the latter would carry higher
unit cost and lower capacity factor than biomass power plants. TPCH is trading at
only 17x FY17F PE, in line with peers average multiple, but offers superior earnings
growth of 117% this year.
For GUNKUL, we see an opportunity to increase exposure as the share price has
fallen c.20% since mid-January because of concerns over the ALR issue, but none
of GUNKULs projects are located in ALR areas. Our TP implies 39x FY17F PE but
that will drop to only 17x based on FY19F earnings as the company is expected to
register solid earnings growth of 63% FY18F and 30% in FY19F.

Telecom UNDERWEIGHT
Earnings outlook remains weak, competition still intense

We forecast sector core earnings will drop by 10% to Bt26.5bn in FY17F. The key
drag would be DTAC which bottom-line will turn to Bt1.2bn loss in FY17F from
Bt2.0bn profit in FY16. TRUE would remain loss-making. In our coverage, ADVANC
would be the only mobile operator who is profitable although earnings growth would
be flat this year. In term of competition, marketing expenses for ADVANC and DTAC
in 4Q16 remain high, which implies competition is still intense.
Sector earnings are expected to be weak Marketing expenses remain high

(Btm)
(Btm)
60,000
2,500
50,000
2,000
40,000
30,000 1,500
20,000 1,000
10,000
500
0
2011 2012 2013 2014 2015 2016 2017F 2018F 0
-10,000
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
-20,000
ADVANC DTAC
ADVANC DTAC TRUE
ADVANC maintains lead, TRUE is now no. 2 in terms of subscriber share

In 4Q16, ADVANC continued to lead in both subscriber and revenue market shares
at 45.2% and 50%, respectively. Its revenue market share had improved by 40bps
qoq, which is a good sign. That means its improving network quality, especially 4G,
has started bearing fruit. We are concerned with DTAC as its subscriber and
revenue market shares have continued to decline qoq to 27.4% (-1ppt qoq) and
25.4% (-90bps qoq), respectively. Moreover, DTAC has lost its no. 2 position in term
of subscriber share to TRUE in 4Q16.
TRUE is now no.2 in terms of subscriber market share ADVANC posted 40bps qoq growth in revenue market
share
100% 100%
90% 90% 16.4 16.3 16.8 16.3 17.2 17.8 18.1 20.8
23.4 23.3 23.1 22.9 23.4 24.3 25.6 23.1 24.1 25.1 25.9 27.4 22.0 23.6 24.1 24.6
80% 80%
70% 70% 30.9 30.1 30.1 29.5

31.4 28.8 29.0 28.3 27.5 26.5 26.3 25.4
60% 30.6 30.3 29.8 29.9 30.9 30.4 30.5 30.0 29.1 28.4 60%
29.5 27.4
50% 50%
40% 40%
30% 30%
52.2 52.8 53.1 53.5 53.3 53.4 52.9 50.9 50.5 49.9 49.6 50.0
46.0 46.4 47.1 47.2 45.7 45.3 44.9 46.5 45.9 45.9 45.7 45.2
20% 20%
10% 10%
0% 0%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
ADVANC DTAC TRUE ADVANC DTAC TRUE
ADVANC and INTUCH are our favorites

We prefer ADVANC and INTUCH because they offer stable earnings and decent
dividend yields, as the sector outlook remains cloudy. We have NEUTRAL rating for
TRUE as we would like to see its net profit turn to black before reviewing our
recommendation. We have an UNDERPERFORM rating for DTAC as its earnings
are trending down and there is no sign the company can turnaround its service
revenue ex. IC and protect its market share.

Utilities UNDERWEIGHT
Rising bond yields to pressure utilities stocks

We have an UNDERWEIGHT rating for the Utilities sector. It is usually considered
a defensive sector with high-yield plays, and prices of the four major power stocks
in Thailand - EGCO, GLOW, GPSC and RATCH - had risen by 31%, 7%, 68% and
5%, respectively, in 2016 as investors sought higher yields in a low interest rate
environment. However, we see a contrasting picture this year. Historical data
indicate rising bond yields lead the Utilities sector to underperform the SET Index,
and vice versa. Meanwhile, low GDP growth of +/-3% in the last three years has led
to excess power capacity.
BPP is our sole top pick

We expect BPPs share price to be re-rated, like GPSC after its power plants started
to deliver sustainable output. The key earnings growth driver for FY17F would be
stable output at Hongsa power plant. We estimate Hongsa will run at 80% utilization
rate this year vs c.60% in FY16. Our Bt28.0 TP implies 16x FY17F PE. This is a
premium to peers average of 13x but is justified by 15% earnings growth (3-year
CAGR) over FY16-19F.
MSCI Thailand Utilities Index vs 10-year TH bond yield
Source: Bloomberg, Krungsri Securities

CG Rating 2015 Companies with CG Rating
ADVANC BAFS BCP BIGC BTS CK CPN DRT DTAC DTC EASTW EGCO GRAMMY HANA
HMPRO INTUCH IRPC IVL KBANK KCE KKP KTB LHBANK LPN MCOT MINT MONO NKI
PHOL PPS PS PSL PTT PTTEP PTTGC QTC RATCH ROBINS SAMART SAMTEL SAT SC
SCB SCC SE-ED SIM SNC SPALI THCOM TISCO TKT TMB TOP VGI WACOAL
AAV ACAP AGE AHC AKP AMATA ANAN AOT APCS ARIP ASIMAR ASK ASP BANPU
BAY BBL BDMS BKI BLA BOL BROOK BWG CENTEL CFRESH CHO CIMBT CM CNT
COL CPF CPI CSL DCC DELTA DEMCO ECF EE ERW GBX GC GFPT GLOBAL
GUNKUL HOTPOT HYDRO ICC ICHI INET IRC KSL KTC LANNA LH LOXLEY LRH MACO
MBK MC MEGA MFEC NBC NCH NINE NSI NTV OCC OGC OISHI OTO PAP
PDI PE PG PJW PM PPP PR PRANDA PREB PT PTG Q-CON QH RS
S&J SABINA SAMCO SCG SEAFCO SFP SIAM SINGER SIS SITHAI SMK SMPC SMT SNP
SPI SSF SSI SSSC SST STA STEC SVI SWC SYMC SYNTEC TASCO TBSP TCAP
TF TGCI THAI THANA THANI THIP THRE THREL TICON TIP TIPCO TK TKS TMI
TMILL TMT TNDT TNITY TNL TOG TPC TPCORP TRC TRU TRUE TSC TSTE TSTH
TTA TTCL TTW TU TVD TVO UAC UT UV VNT WAVE WINNER YUASA ZMICO
2S AEC AEONTS AF AH AIRA AIT AJ AKR AMANAH AMARIN AP APCO AQUA

AS ASIA AUCT AYUD BA BEAUTY BEC BFIT BH BIG BJC BJCHI BKD BTNC
CBG CGD CHG CHOW CI CITY CKP CNS CPALL CPL CSC CSP CSS CTW
DNA EARTH EASON ECL EFORL ESSO FE FIRE FOCUS FORTH FPI FSMART FSS FVC
GCAP GENCO GL GLAND GLOW GOLD GYT HTC HTECH IEC IFEC IFS IHL IRCP
ITD JSP JTS JUBILE KASET KBS KCAR KGI KKC KTIS KWC KYE L&E LALIN
LHK LIT LST M MAJOR MAKRO MATCH MATI MBKET M-CHAI MFC MILL MJD MK
MODERN MOONG MPG MSC MTI MTLS NC NOK NUSA NWR NYT OCEAN PACE PATO
PB PCA PCSGH PDG PF PICO PL PLANB PLAT PPM PRG PRIN PSTC PTL
PYLON QLT RCI RCL RICHY RML RPC S SALEE SAPPE SAWAD SCCC SCN SCP
SEAOIL SIRI SKR SMG SOLAR SORKON SPA SPC SPCG SPPT SPVI SRICHA SSC STANLY
STPI SUC SUSCO SUTHA SYNEX TAE TAKUNI TCC TCCC TCJ TEAM TFD TFI TIC
TIW TLUXE TMC TMD TOPP TPCH TPIPL TRT TSE TSR TT UMI UP UPF
UPOIC UREKA UWC VIBHA VIH VPO WHA WIN XO
Disclaimer
The disclosure of the survey result of the Thai Institute of Directors Association ("IOD") regarding corporate governance is made pursuant to
the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on
the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public
investor. The result, therefore, is from the perspective of a third party. It is not an assessment of operation and is not based on inside
information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the
survey result may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public
Company Limited does not confirm, verify, or certify the accuracy and completeness of such survey result.
Anti-corruption Progress Indicator 2015
Level 5: Extended
BCP CPN GYT PE PM PPP PT PTT PTTGC SAT SCC THANI TOP
Level 4: Certified
ADVANC AMANAH ASP AYUD BAFS BANPU BAY BBL BKI BLA BTS CFRESH CIMBT CNS
CSL DCC DRT DTC EASTW ECL EGCO ERW FSS GCAP HANA HTC IFEC INTUCH
IRPC IVL KBANK KCE KGI KKP KTB LANNA LHBANK MBKET MFC MINT MTI NKI
PPS PSL PTG PTTEP SABINA SCB SINGER SIS SNC SNP SSF SSI SSSC SVI
TCAP THCOM THRE THREL TISCO TMB TMD TNITY TOG TSTH
Level 3B: Established by Commitment and Policy

AAV AHC AIT AKR ARROW ASK BA BDMS BEC BJCHI CGH CHG CHOW CIG
CITY CK CKP COLOR CWT EARTH EASON EPG F&D FANCY FIRE FMT FORTH GENCO
GL GOLD GPSC GRAMMY HYDRO IRCP IT JCT KCM KWC LH LIT LOXLEY MACO
MANRIN MATI MODERN MSC NOBLE NOK NPK NUSA OISHI OTO PAF PAP PATO PF
PJW PLANB PLE POLAR PRG PTL Q-CON QTC RCI S11 SALEE SAM SAMART SAMTEL
SAPPE SC SCP SFP SIM SLP SMT SPA SPORT SSC SST STEC STPI SUC
SUTHA T TAE TBSP TCC TFD TGCI TGPRO THANA THIP TIW TK TMW TNDT
TOPP TPC TPCH TPIPL TSR TT TYCN UAC UBIS UEC UMI UP UPF UT
UV VPO WAVE WINNER YUASA
Level 3A: Established by declaration of intent

ABC ACAP AGE AH ANAN AP APCS APURE AS ASIA ASIAN ASIMAR BIGC BROOK
BWG CEN CENTEL CHARAN CHO CHOTI CM CNT COL CPF CPI CPL DELTA DEMCO
DIMET DNA DTAC EA ECF EE EVER FPI GBX GC GFPT GLOW HMPRO HOTPOT
ICC ICHI INOX INSURE IRC JAS JTS JUBILE KC KTC KYE LHK LPN LRH
MAKRO MC MCOT MFEC MJD MONO MOONG NBC NDR NINE NMG NSI NTV OGC
PACE PCSGH PDI PG PHOL PLAT PR PRANDA PREB PS QLT RATCH RML ROBINS
ROJNA RWI SAMCO SCCC SCG SEAOIL SE-ED SENA SITHAI SMK SMPC SPALI SPC SPCG
SPI SRICHA STANLY SUPER SYMC SYNEX SYNTEC TASCO TCMC TFI THAI TICON TKT TLUXE
TMILL TMT TNL TPCORP TSTE TTCL TU TVI UOBKH UREKA VGI VNT WACOAL WHA
ZMICO
Level 2: Declared
2S ABICO AF AIRA AKP ALUCON AMARIN AMATA AOT APCO BEAUTY BFIT BH BKD
BLAND BROCK BRR BSBM BTNC CCP CI CSC CSR CSS EFORL EPCO ESTAR FE
FER FNS FVC GEL GLOBAL GUNKUL IEC IFS ILINK INET J JMT JUTHA K
KASET KBS KCAR KKC KSL KTECH L&E LALIN LTX M MALEE MBAX MBK MEGA
MILL MK MPG MTLS NCH NCL NNCL NPP OCC OCEAN PB PCA PDG PRINC
PSTC PYLON QH ROCK ROH RP RPC S&J SGP SIAM SKR SMG SMIT SORKON
SPACK SPPT SR SUSCO TAKUNI TEAM TF TIC TIP TIPCO TMC TMI TPA TPP
TRT TRU TRUE TSC TSI TTW TVD TVO TVT U UKEM UNIQ UWC VIBHA
VNG WIIK WIN XO
Level 1: Committed
AEONTS AFC AJ AMC AQUA ARIP AUCT BAT-3K BIG BJC BOL CBG CCET CCN
CGD CMR CPH CSP CTW DCON DRACO DSGT DTCI E EMC ESSO FOCUS FSMART
GIFT GLAND GRAND GREEN HFT HTECH IHL ITD JSP KDH KTIS KTP LEE LST
MAJOR MATCH MAX M-CHAI MDX MIDA ML MPIC NC NEP NWR OHTL PICO PK
PL PPM PRAKIT PRECHA PRIN RAM RICH RS SANKO SAUCE SAWAD SAWANG SCN SEAFCO
SF SHANG SIRI SMART SMM SOLAR SPG SPVI STA STAR SVH SVOA SWC TAPAC
TC TCCC TCJ TCOAT TH TKS TNH TNPC TPAC TPOLY TRC TRUBB TSE TTA
TTI TTL TTTM TWP TWZ UMS UPA UPOIC UTP UVAN VARO VI VIH VTE
WG
Disclaimer
The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by
Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the
Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as
stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report
(Form 56-2), or other relevant documents or reports of such listed company . The assessment result is therefore made from the perspective of
Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is
only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change
to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, verify, or certify the accuracy and
completeness of the assessment result."
Reference
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
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 3: Established Carrying out preventive measures, risk assessment, communication and training for all employees, including
consistent monitoring and review processes
Level 3A: Established by declaration of intent, Level 3B: Established by Commitment and Policy
Level 2: Declared Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption
(CAC) or equivalent initiatives
Level 1: Committed Organizations statement or board's resolution to work against corruption and to be in compliance with all relevant laws
Krungsri Securities Public Company Limited
Headquarters
898 Ploenchit Tower, 3rd Floor, Ploenchit Road, Lumpini
Pathumwan, Bangkok 10330
Tel: 0-2659-7000 Fax: 0-2658-5699
Internet Trading: 0-2659-7777
Branches
Emporium Nakhon Pathom
662 Emporium Tower, Fl. 10, Sukhumvit 24 Road 67/1 Ratchadamnoen Road, Tambol Phra Pathom Jaedee,
Klongton, Klongtoey, Bangkok 10110 Amphur Muang, Nakhon Pathom 73000
Tel: 0-2695-4500 Fax: 0-2695-4599 Tel: 0-3427-5500-7 Fax: 0-3421-8989
Central Bangna Suphanburi
589/151 Central City Tower 1 Office, Fl. 27 249/171-172 Moo 5 Tambol Ta Rahad,
Bangna-Trad Road, Bangna, Bangkok 10260 Amphur Muang, Suphanburi, 72000
Tel: 0-2763-2000 Fax: 0-2399-1448 Tel: 0-3550-1234 Fax: 0-3552-2449
Rama II Nakhon Ratchasima
111/917-919 Rama II Road, Smaedum, 168 Chomphon Road, Tambol Nai Muang,
Bangkhuntien, Bangkok 10150 Amphur Muang Nakhon Ratchasima,
Tel: 0-2895-9575 Fax: 0-2895-9557 Nakhon Ratchasima 30000
Tel: 0-4425-1211-4 Fax: 0-4425-1215
Vibhavadi-rangsit
Bank of Ayudhya Public Company Limited Khon Kaen
123 Suntowers (B) Building, Vibhavadirangsit Road, 114 Sri Chan Road, Tambol Nai Muang,
Jompol, Jatujak, Bangkok 10900 Amphur Muang, Khon Kaen 40000
Tel: 0-2273-8388 Fax: 0-2273-8399 Tel: 0-4322-6120 Fax: 0-4322-6180
Chonburi Chiang Mai
64/17 Sukhumvit Road, Tambol Bang Plasoi, 70 Chang Phuak Road, Tambol Sri Phum
Amphur Muang, Chonburi 20000 Amphur Muang, Chiang Mai 50200
Tel: 0-3879-0430 Fax: 0-3879-0425 Tel: 0-5321-9234-6 Fax: 0-5321-9247
Hat Yai Branch Chiang Rai
90-92-94 Nipat U Tit Nueng Road,Tambol Hat Yai, 231-232 Thamalai Road, Tambol Wiang,
Amphur Hat Yai, Songkhla 90110 Amphur Muang, Chiang Rai 57000
Tel: 0-7422-1229 Fax: 0-7422-1411 Tel: 0-5371-6489 Fax: 0-5371-6490
Phitsanulok
275/1 Phichaisongkram Road, Tambol Nai Muang,
Amphur Muang, Phitsanulok 65000
Tel: 0-5530-3360 Fax: 0-5530-2580
Central line:
Analyst Team Sector Coverage 662-659-7000 E-mail
Naphat Chantaraserekul, Head of Research Energy, Petrochemical, Strategy ext. 5000 naphat.chantaraserekul@krungsrisecurities.com
Kittisorn Pruitipat, CFA, FRM Construction
Property, ICT,Materials
Contractor ext. 5019 kittisorn.pruitipat@krungsrisecurities.com
Jesada Techahusdin, CFA Banking, Consumer Finance, Insurance ext. 5004 jesada.techahusdin@krungsrisecurities.com
Sunthorn Thongthip Insurance
Food, Insurance Strategy
Transportation, ext. 5009 sunthorn.thongthip@Krungsrisecurities.com
Worrapong Tuntiwutthipong Electronic, Automotive, Commerce ext. 5016 worrapong.tuntiwutthipong@krungsrisecurities.com
Karun Intrachai Media
Renewable Energy ext. 5010 karun.intrachai@krungsrisecurities.com
Teerapol Udomvej Healthcare, Tourism ext. 5012 teerapol.udomvej@krungsrisecurities.com
Kitti Pitakteerabandit, Assistant Analyst
Artit Jansawang Mid - Small cap, MAI ext. 5005 artit.jansawang@krungsrisecurities.com
Nalinee Praman, Assistant Analyst Mid - Small cap, MAI
Fax 662-658-5643
Definition of Ratings
OUTPERFORM - Stocks with an expected capital gain above 10% in the next 12 months for small-caps, above 5% for big-caps
NEUTRAL - Stocks with an expected capital gain between -10% and +10% in the next 12 months for small-caps, -5% to +5% for big-caps
UNDERPERFORM - Stocks with an expected capital gain below 10% in the next 12 months for small-caps, below 5% for big-caps
www.krungsrisecurities.com

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17 March, 2017

MARKET UPDATE | Thailand Strategy

Thailand Strategy - Thai Pulse

Storm will pass, spring will come

Key economic data indicate mild recovery 4

Our stock picks 12

Thailand Sector Update

Food & Beverage OVERWEIGHT 16

Life Insurance OVERWEIGHT 18

Consumer Finance NEUTRAL 27

Media sector NEUTRAL 35

Renewable Energy NEUTRAL 36

Krungsri Securities Research 2

Source: Bloomberg, Krungsri Securities Source: Krungsri Research

Source: Bloomberg, Krungsri Research Source: Bloomberg, Krungsri Research

Krungsri Securities Research 3

Political events in Eurozone in 2017

Source: Krungsri Research and Krungsri Securities

Key economic data indicate mild recovery

Krungsri Securities Research 4

Source: MOC, Krungsri Research Source: MOC, Krungsri Research

Private consumption index fell in January 2017 Extra Budget of Bt190bn

Source: BOT, Krungsri Securities Source: Krungsri Research

Improving farm income mainly driven by rising rubber prices

Krungsri Securities Research 5

Farm income index was driven by only some crops

5% 2Q-3Q16 were driven by cassva production

Source: BOT, Krungsri Securities

Agricultural price index Agricultural production index

Source: BOT, Krungsri Securities Source: BOT, Krungsri Securities

Several factors to boost private investment, but no visible impact yet

Krungsri Securities Research 6

Thailand GDP component

Source: BOT, Krungsri Securities Source: Bloomberg, Krungsri Securities

Tourism continues to recover qoq and grow yoy

Krungsri Securities Research 7

International tourist arrivals Inbound Chinese tourists

Source: MOTS, Krungsri Research Source: MOTS, Krungsri Research

Remain positive on mid- to long-term outlook on infrastructure biddings

Because of this, we still believe the government is committed to accelerating tenders

Krungsri Securities Research 8

Source: Krungsri Research

Krungsri Securities Research 9

We remain bullish on Thailands infrastructure investment that expands to rural

Comparison with regional markets (FY17F)

Earnings performance by sector (2017F)

Source: Krungsri Securities

Krungsri Securities Research 10

Thailand: Market earnings growth

Source: Bloomberg and Krungsri Securities

SET Index forward PE at year end SET Index forward PE

SET Index forward PBV SET Index ROE

Krungsri Securities Research 11

Our stock picks

Krungsri Securities Research 12

Expect loan demand to start improving in 2H17

Key agricultural indicators Number of cars allowed to be sold between Oct 16

PromptPay would reduce fee income in the medium term

Efficient NIM and OPEX management to support earnings growth

Krungsri Securities Research 13

Expect stable NPL formation and credit cost

Krungsri Securities Research 14

Near-term sentiment is negative as investors fear further delay of