Autonomous Vehicles - POEMS Vehicles ... Rio Tinto’s “ Mine of the Future”, ... • Driverless cars would require extensive up-to-date maps for their on-

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Autonomous Vehicles

CSI 300 Index

21 march 16, 8.15am/11.15am Morning Call/Webinar



Disclaimer

The information contained in this presentation has been obtained from public sources which Phillip Securities Pte Ltd (“PSPL”) has no reason to

believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this

presentation are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or

warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any

such information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the

information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be

liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made

available, even if it has been advised of the possibility of such damages.

This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or

particular needs of any particular person.

You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment

objectives, financial situation or particular needs, before making a commitment to invest in such products.



Autonomous Vehicles

Ho Kang Wei

Phillip Securities Research Pte Ltd

21st March 2016



4

Autonomous Driving

Aka Driverless Cars

Vehicles with the ability to pilot themselves

As of 2013, 4 US states have passed laws permitting autonomous cars

Likely to be the next disruptive technology

Many companies are projecting to push out their first driverless car for purchase in 2020

Mercedes’ F015 Luxury in Motion

Source: Mercesdes-benz



5

How it works?

Hardware Components

• Sensors

• Radars, cameras, lidars, GPS

• Processors

• On-board processors needed

to handle constant stream of

info without lag

• Internet Connectivity

• Wireless routers, V2X

communicators



6

How it works?

Software Components

• Operating System

• Driving is extremely complex, OS must be able to adapt to change in a blink

of an eye

• Companies are still striving to perfect their OSes

• Other Software

• High Definition embedded maps

• User Interfaces (Cars as the ultimate mobile device)



7

Features already available

• Parking assistance – using cameras and sensors to drive the vehicle into the

parking space has been available since 2006 outside Japan, which had the

technology in a primitive form since 1999.

• Adaptive cruise control – using radar or lidar to allow the vehicle to adjust its

speed with respect to traffic has been available in Japan since 1997

• Automatic Emergency Brake – Mercedes-Benz first premiered the technology

to the world in 1996.

Other Sectors with autonomous vehicles

• Trucking – Daimler and Volvo have started testing autonomous trucks on

roads in USA

• Mining – Rio Tinto’s “ Mine of the Future”, with a fleet of 69 autonomous trucks

hauling iron ore in Pilbara

Implementations



8

Timeline

When Autonomous vehicles arrive

• Likely first available at premium price

• High cost of high grade components (lidar, GPS) would make mass

production cost prohibitive

Wide spread Autonomous adoption

• Likely in 10-15 years, assuming no major incident

• Consequences?



9

Hardware:

Cisco Systems Inc (NASDAQ:CSCO)

• World leader in networking equipment

• Increase demand for wireless networking equipment

• Invested in Cohda Wireless, Australian company developing V2X

comm technology

• Slightly undervalued at 13.3 PER with 3.88% dividend yield

.

Delphi Automotive (NYSE:DLPH)

One of car industry’s largest suppliers

Pioneered many cutting edge technologies for automobiles

Recently showed off concept autonomous car during CES

Likely to benefit from supplying car companies with components

Slightly undervalued at 16.64 PER and 1.68% yield

Potential Companies (Publically Listed)



10

Hardware:

Mobileye (NYSE:MBLY)

• Develops camera- based advanced driver assistance systems

(ADAS)

• Pure play for investors seeking ADAS exposure

• Significant risk of other companies developing their own products

• Tesla announced that Mobileye would be powering the autopilot

feature of their Model S cars

• Overvalued at 151.78 PER, MBLY does not pay a dividend.


Tesla’s Model S

Sources: Tesla



11

Hardware:

Nvidia (NASDAQ:NVDA)

• Designs graphics processing unit (GPUs) for gaming market and

Systems on Chip (SOC) for mobile computing

• 2014, transitioned into the Auto industry

• Earlier this year, unveiled first in vehicle AI supercomputer, Drive

PX2

• Powered by NVDA GPUs, has 360 situation awareness around

the car

• Capable of processing data from 12 cameras, lidar, radar and

ultra sonic sensors

• Fairly Valued at 30.3 PER, and a 1.42% Dividend Yield, 5 yr averge

PER 20.8x


Drive PX2



12

Software:

Nokia (NYSE:NOK)

• Nokia HERE is the market leader for automotive embedded maps

• Driverless cars would require extensive up-to-date maps for their on-

board computers

• Potential partner or acquisition target

• Fair valued at 18.7 PER with 2.54% dividend yield

.

Google (NASDAQ:GOOGL)

• First company to venture into the space, significant head start on

development

• Over 1 million miles of self driving on test vehicles

• If GOOGL is the first to develop the OS, likely to reap large benefits

by licensing the OS to other car developers

• Fair valued at 31.34 PER, GOOGL does not pay out a dividend.


Google's in-house driverless car design

Sources: Google



13

Others:

Tesla (NASDAQ:TSLA)

• Electric car manufacturer

• Recently updated their Model S with the Summon function

• Allowing the car to park itself and return to the owner at a push

of a button

• Recently beaten down amongst tempered expectations

• Should the company be able to produce a commercially viable

autonomous car, the company could regain favour in the market

• TSLA is currently loss making and we feel it is overvalued given the

risk




14

Apple

• Market rumours that Apple is also developing a self-driving car

• Apple has hired several auto engineers from Tesla, Volkswagen etc

• Apple has yet to confirm or deny such rumours

Baidu

Partnered with BMW to produce a self-driving car for the Chinese market

Baidu claims to have completed successful test on the streets of Beijing

Ford

Announced it is tripling its fleet of autonomous test vehicles this year

Announced intentions to test their autonomous cars on the streets of California

Honda

Received approval to test its autonomous cars in California

Special Mentions



CSI 300 Index

Dark Clouds still looming

Jeremy Ng

Phillip Securities Research Pte Ltd

21st March 2016

http://internetfileserver.phillip.com.sg/POEMS/Stocks/Research/SectorStrategy/SG/CSI30020160316.pdf



16

Investment Thesis

Boom Bust market structure from 2006 – 2008 (CSI 300 Weekly chart)



17

Investment Thesis

Bearish rejection off 38.2% Fibonacci Retracement level



18

Investment Thesis

Characteristics of the boom bust cycle from 2006 - 2008

Follows a series of higher high. Higher low, higher high for the boom

cycle

Follows a series of lower low, lower high, lower low for the bust

cycle

The second leg of the crash finalizes after price broke and close

below the 3122 lower low point

38.2% Fibonacci retracement level halted the pullback and formed

the lower high point

Price fell 47% from the 5891 all time high for the 1st wave down

Price fell 60% for the 2nd wave down



19

Investment Thesis

Current Market structure (CSI 300 Weekly Chart)



20

Investment Thesis

Bearish rejection off the 38.2% Fibonacci Retracement level



21

Investment Thesis

Similar patterns playing out now

Price followed an identical rally for the boom cycle with a series of

higher high, higher low, higher high pattern

We are in the midst of forming the lower low, low high, lower low

pattern to finalise the bust cycle

Price fell 45% from the 5380 high for the first leg down

38.2% Fibonacci Retracement level capped the pullback from the

lower low point to create the lower high point



22

Investment Thesis

Similar patterns playing out now

There was a marginal close below the 2952 lower low point on the

week ending 24/01/16 validating the second leg of the bust cycle

The second leg down could take price down to the 1610 previous

low



23

Investment Thesis

Potential bottoming area



Further downside next

We could see the 2102 – 1606 support tested for the next leg down

Tradable instrument :

Direxion Daily CSI 300 China A Share Bear 1X shares - (AMEX:CHAD)

24

Conclusion





Disclaimer

The information contained in this presentation has been obtained from public sources which Phillip Securities Pte Ltd (“PSPL”) has no reason to

believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this

presentation are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or

warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any

such information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the

information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be

liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made

available, even if it has been advised of the possibility of such damages.

This presentation is intended for general circulation only and does not take into account the specific investment objectives, financial situation or

particular needs of any particular person.

You should seek advice from a financial adviser regarding the suitability of the investment product, taking into account your specific investment

objectives, financial situation or particular needs, before making a commitment to invest in such products.



27

Analysts Jacky Lee, CEO, Head of Research

Pei Sai Teng, Macro

Jeremy Ng, Technical Analysis

Jeremy Teong, Banking & Finance

Soh Lin Sin, Consumer | Healthcare

Richard Leow, Transport | REITs (Industrial)

Dehong Tan, REITs

Peter Ng, Infrastructure | Hospitality

Ho Kang Wei, US

Chen Guangzhi, Oil and Gas | Energy

By Phillip Securities Research Mohamed Ghazali, Operations Exec

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Autonomous Vehicles - POEMS Vehicles ... Rio Tinto’s “ Mine of the Future”, ... • Driverless cars would require extensive up-to-date maps for their on-