Recent CGS-CIMB Research Ideas Asia Pacific Daily · Equity research June 20, 2018 Asia Pacific Daily - 20 June 2018 Equity Research Reports… IDEA OF THE DAY | Indonesia/Thailand

Equity research│June 20, 2018

Asia Pacific Daily - 20 June 2018 Equity Research Reports…

▌IDEA OF THE DAY | Indonesia/Thailand Strategy Note - Democratic process and stock market | P2 The past two decades of democratic process in Indonesia may provide neighbouring Malaysia with some constructive lessons, notwithstanding the differing circumstances. The first five years after the historic general elections in 1999 saw systemic changes politically, such as media freedom, direct presidential elections and KPK's formation. Economic reforms and growth took backseats initially though, as reflected in poor corporate earnings growth and equally anaemic stock market returns. The next five years after that have been most rewarding to the capital market, so far to date, supported by the passing of investment laws and more economic reforms. Ananda Development (ADD▲, tp:THB6.00▲) - Getting back on track | P3 Ashton Asoke has been granted the building permit and started transfers on 15 Jun. We assume c.48% of Ashton Asoke will be transferred in 2018F and 52% in 2019F. Meanwhile, ANAN targets to transfer all units of Ashton Asoke by end-2018. ANAN's share price is down 18% YTD. We view Ashton Asoke news as positive for ANAN's earnings growth outlook and should remove stock overhang. Its backlog as at end-1Q18 secures 109.5% and 56.7% of our revenue and JV transfer forecasts in FY18-19F, respectively. Upgrade to Add from Hold with a higher TP of THB6.0 on better earnings growth outlook with 46.7% CAGR and high revenue visibility in FY18-19F. ——————————————————————————————————————————————————————————————————————————————————————— ▌Australia GrainCorp (HOLD, tp:A$7.50▼) - Another tough year is on the way | P4 Insurance Australia Group (HOLD, tp:A$7.54▲) - Waving goodbye to parts of Asia | P5 Otto Energy (ADD- Initiation, tp:A$0.11) - Cash flow on sale | P6 ——————————————————————————————————————————————————————————————————————————————————————— ▌China/Hong Kong China Gas (ADD, tp:HK$38.00▲) - Plenty of growth potential ahead | P7 ——————————————————————————————————————————————————————————————————————————————————————— ▌Malaysia AWC Berhad (ADD, tp:RM1.00) - Chugging along nicely, thanks to IFM segment | P8 ——————————————————————————————————————————————————————————————————————————————————————— ▌Singapore China Aviation Oil (ADD, tp:S$2.03) - Streamlining its associate portfolio | P9 ——————————————————————————————————————————————————————————————————————————————————————— ▌Thailand Thai Vegetable Oil (ADD, tp:THB38.75) - Strong fundamentals amid uncertainties | P10

Recent CGS-CIMB Research Ideas

CHN: Environmental 18/6 The long-awaited renewable subsidy approvals

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THB: LPN Development 15/6 A new chapter begins

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HKG: China Yuhua Education Corp 12/6 Still a hidden gem

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HKG: GCL-Poly 11/6 A victim of government controls on solar power

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KRW: Samsung Electro-Mechanics 8/6 Stronger MLCC momentum ahead

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Regional Equity Research Contact

Bertram LAI Head of Research T: (852) 2532 1111 E: [email protected]

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Upcoming CGS-CIMB Conf. / Events

CIMB Malaysia Consumer Day 03 Jul, Theme: Malaysia; LOC: Kuala Lumpur —————————————————————————————————————————

CGS-CIMB 12th Annual Indonesia Conference 11-13 Jul; Theme: Indonesia; LOC: Bali —————————————————————————————————————————

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.

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Strategy Note Indonesia│June 19, 2018



Indonesia Strategy Democratic process and stock market ■ The past two decades of democratic process in Indonesia may provide neighbouring

Malaysia with some constructive lessons, notwithstanding the differing circumstances. ■ The first five years after the historic general elections in 1999 saw systemic changes

politically, such as media freedom, direct presidential elections and KPK's formation. ■ Economic reforms and growth took backseats initially though, as reflected in poor

corporate earnings growth and equally anaemic stock market returns. ■ The next five years after that have been most rewarding to the capital market, so far

to date, supported by the passing of investment laws and more economic reforms.

Key difference between Indonesia and Malaysia's political systems Malaysia uses a UK style parliamentary system with a Prime Minister and party coalitions. Indonesia uses a hybrid multi-party presidential system. Indonesia has direct popular elections for President, and the President’s term is fixed, regardless of the breakdown of parties in the legislature, and limited to two terms. Both systems have multi parties with none having a simple majority. Coalitions of parties form the government and also the opposition. Both countries seem to have genuine democratic systems.

Independence from Dutch to the ‘reformasi’ era Indonesia adopted parliamentary democracy after independence from the Netherlands and staged its first fair and free elections in 1955. Economic pressure amid anti-communist hysteria led to the change to presidential system in 1966, with Soeharto succeeding Soekarno as the country’s second President. Parliamentary elections were held every five years from 1973 and Soeharto ruled for 32 years until forced to step down in 1998, and conferred the presidency to his Vice President (VP), BJ Habibie.

Post Soeharto era – more turmoil initially The Habibie administration started off with a key reform: press freedom. New electoral laws were introduced in 1999, which led to the first fair and free parliamentary election since 1955. PDI-Perjuangan, the party of an anti-Soeharto icon, won the most seats with 33% seats in a fragmented parliament. A coalition of parties formed the government consequently, with Gus Dur appointed as the country’s third president. He was ousted in 2001, and the parliament mandated his VP, Megawati, to be the nation's fourth president.

Ushering in a new era, solidifying democratic process During the Megawati era, key reforms included formation of an independent Anti-Corruption Commission (KPK) and independent Judicial Commission; introduction of presidential term limits to two five-year terms; and an amendment from indirect elections via the People's Consultative Assembly (MPR) to direct popular presidential election. Indonesia ended the IMF relief programme in 2003 and embarked on an aggressive privatisation programme. 2004 marked the beginning of direct presidential elections.

Political euphoria proven to be short-lived in the stock market In the past two decades since ‘reformasi’, stock market performance was at its best after the first four years or so of major political change. Susilo Bambang Yudhoyono's 1st term was most rewarding to investors. The election of Jokowi as President in 2014 marked another significant change, which proved to be challenging to the stock market initially. 2019 shall see the parliamentary and presidential elections occurring concurrently. If history is a guide, the market may see more volatility ahead.

Figure 1: JCI in US$ term since 1999 (shaded graphs represent times of election)

SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS

Indonesia

Insert

Analyst(s)

Erwan TEGUH T (62) 21 3006 1720 E [email protected] Peter P. SUTEDJA T (62) 21 3006 1726 E [email protected] Namira LAHUDDIN T (62) 21 3006 1728 E [email protected]

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Company Note Property Development│Thailand│June 19, 2018



Insert Insert

Ananda Development Getting back on track ■ Ashton Asoke has been granted the building permit and started transfers on 15 Jun. ■ We assume c.48% of Ashton Asoke will be transferred in 2018F and 52% in 2019F.

Meanwhile, ANAN targets to transfer all units of Ashton Asoke by end-2018. ■ ANAN’s share price is down 18% YTD. We view Ashton Asoke news as positive for

ANAN’s earnings growth outlook and should remove stock overhang. ■ Its backlog as at end-1Q18 secures 109.5% and 56.7% of our revenue and JV

transfer forecasts in FY18-19F, respectively. ■ Upgrade to Add from Hold with a higher TP of THB6.0 on better earnings growth

outlook with 46.7% CAGR and high revenue visibility in FY18-19F.

Ashton Asoke started transfers on 15 Jun 18 The Appeal Committee ordered Bangkok Metropolitan Authority (BMA) to comply with the rule of law on Ashton Asoke, ANAN’s THB6.7bn JV with Mitsui Fudosan. ANAN has received the building permit (Aor 6) for Ashton Asoke from the BMA, and started unit transfers on 15 Jun, ahead of previous expectations of 4Q18. ANAN’s share price is down 17.6% YTD as it had not received the building permit from the BMA. We view the news as positive for its earnings growth outlook and should remove the stock overhang.

Expect 48% of Ashton Asoke to be transferred by end-2018F We raise our FY18-19F share of profit from investments in JVs by 28.3-40.7% to reflect transfers of Ashton Asoke. Most of the transfers are likely to take place in 2H18-2019. We assume c.48% of Ashton Asoke will be transferred in 2018F and 52% in 2019F. Meanwhile, ANAN is targeting to transfer all Ashton Asoke units by end-18. We expect ANAN to deliver core EPS CAGR of 46.7% in FY18-19F, the highest in the sector, driven by an increase in the share of profit from investments in JV projects.

Two court cases on Ashton Asoke are still pending According to ANAN’s recent update, two court cases at the Administrative Court in which two parties claim that BMA and Mass Rapid Transit Authority of Thailand (MRTA) did not follow the proper procedure on the use of MRTA’s land as an entrance/exit for the Ashton Asoke project are still pending. The timeline for the outcome of the two court cases is unknown. We believe if the Administrative Court rules in favour of BMA and MRTA, it will boost customer confidence and speed up unit transfers at Ashton Asoke.

Earnings likely to sequentially increase and peak in 4Q18 We estimate ANAN’s 2Q18 net profit at THB200m, up 38.2% qoq but down 28.4% yoy. The qoq growth is likely to be driven by higher project management revenue and share of profit from investments in JVs, mainly from Ashton Chula-Silom (project value: THB8.7bn) which started transfers in Jun 18. We expect ANAN’s earnings to rise sequentially and peak in 4Q18 as four JV projects with a total value of THB17.3bn will start transfers in 4Q18.

Upgrade to Add as we include Ashton Asoke transfers We raise our FY18-19F core EPS by 12-13.5% to reflect transfers of Ashton Asoke in our JV project transfer assumptions. We upgrade ANAN to Add from Hold in view of better earnings growth prospects and high revenue visibility in FY18-19F. Our TP rises to THB6.0, based on 8.6x FY19F P/E (7.5x previously), -0.5 s.d. from its historical forward mean, due to our earnings revision and a higher P/E multiple. Potential re-rating catalysts are faster-than-expected transfers. Downside risks include the two pending court cases.


Thailand

ADD (previously HOLD) Consensus ratings*: Buy 11 Hold 1 Sell 1

Current price: THB4.92 Target price: THB6.00 Previous target: THB4.66

Up/downside: 22.0% CGS-CIMB / Consensus: 9.2%

Reuters: ANAN.BK Bloomberg: ANAN TB Market cap: US$501.6m THB16,398m Average daily turnover: US$3.03m THB96.58m Current shares o/s: 3,333m Free float: 44.5% *Source: Bloomberg Key changes in this note

FY18-20F share of profit from investments in JVs increased by 1.9%-40.7%.

FY18-19F core EPS increased by 12%-13.5%.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) 15 15.5 -8.9 Relative (%) 19.3 22.8 -15.4

Major shareholders % held Ruangkritya family 55.1 NVDR 3.2 ML Kamolsawas Visut 2.4 Insert

Analyst(s)

Pornthipa RAYABSANGDUAN

T (66) 2 761 9229 E [email protected]

Financial Summary Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F

Total Net Revenues (THBm) 11,738 12,402 10,808 11,917 12,744Operating EBITDA (THBm) 1,630 1,907 1,240 1,558 1,743Net Profit (THBm) 1,501 1,328 1,934 2,526 2,650Core EPS (THB) 0.42 0.32 0.52 0.70 0.74Core EPS Growth 15.6% (22.2%) 60.4% 34.2% 6.5%FD Core P/E (x) 11.83 15.22 9.49 7.07 6.64DPS (THB) 0.13 0.11 0.16 0.22 0.23Dividend Yield 2.54% 2.27% 3.30% 4.47% 4.69%EV/EBITDA (x) 15.45 14.57 26.81 23.19 21.49P/FCFE (x) NA NA 1,087 14 30Net Gearing 82% 77% 107% 114% 110%P/BV (x) 1.52 1.32 1.20 1.07 0.96ROE 14.2% 9.3% 13.3% 16.0% 15.2%% Change In Core EPS Estimates 13.5% 12.0% 0.0%CIMB/consensus EPS (x) 1.01 1.10 1.01

47.0

67.0

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107.0

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Price Close Relative to SET (RHS)

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Food & Beverages│Australia│Equity research│June 19, 2018

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (ABN 49 010 669 726) AFSL 235410 - A PARTICIPANT OF ASX GROUP

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GrainCorp

Another tough year is on the way

We have revised our forecasts following the release of ABARES 2018/19 winter ■crop forecast (FY19 earnings). ABARES is forecasting another small east coast grain crop.

GNC now looks set to face two consecutive well below average seasons (FY18 ■and FY19). Extremely low carryover grain will also impact FY20.

Consensus earnings and GNC’s share price are yet to fully reflect another ■challenging year. Existing shareholders will need to be patient and ride out the poor seasons. For new investors, we would be buyers of GNC closer to A$7.00.

ABARES issues a below average winter grain crop forecast ABARES initial east coast 2018/19 winter grain crop (wheat, barley, canola, chickpeas) forecast is 14.8mt, down from 14.9mt the pcp and is well down on an average season of about 16.1mt. ABARES said that with soil moisture levels below to very much below average across most cropping regions, sufficient and timely winter rainfall will be critically important for crop development. However the BOM forecasts winter (July to September) rainfall to be below average in most Australian cropping regions. With below average rainfall, along with warm and dry conditions, crop prospects will deteriorate further. We will not know the exact size of the crop until harvesting in November-December and will continue to monitor its outlook as the season progresses.

We revise our forecasts for a lower 2018/19 crop Following a materially weaker than expected 1H18 result and a review of our model, we have reduced our FY18 NPAT by 7.2% to A$58.4m. FY19 now looks to be impacted by a well below average crop, low carry-in grain due to the small crop in FY18 and the adverse take-or-pay rail contracts. This has negative implications for GNC’s Storage & Logistics (S&L) and Marketing business units. We now assume FY19 grain receivals of 5.9mt compared to 7.5mt previously. GNC’s high margin export work will also be impacted. As a result, we have reduced our FY19 EBITDA and NPAT forecasts by 16.3% and 42.2%. The greater revision at the profit level reflects the operating de-leverage caused by the company’s high fixed cost base. While our FY19 EBITDA forecast is slightly higher than FY18 due to the growth projects across Malt and Oils, NPAT is lower as FY18 benefited from an A$19.0m tax benefit. In FY20, we assume an average season (until we know otherwise), although this year will be impacted by below-average carryover grain due to the small crop in FY19. We have also revised our FY20 EBITDA and NPAT forecasts by 9.0% and 19.1%. The next opportunity for GNC to benefit from at least an average season and improved carryover grain isn’t until FY21.

Investment view – Hold and A$7.50 price target Given there is now another challenging year in FY19, we maintain a Hold recommendation on GNC and A$7.50 price target. We have set our price target at a 20% discount to our average season valuation of A$9.37 (was A$9.41). We believe this is appropriate given the uncertainty and timeframe until GNC can benefit from improved operating conditions. We would reduce this discount if seasonal conditions were to improve materially.

s

SOURCE: MORGANS, COMPANY REPORTS

▎Australia

HOLD (no change) Current price: A$8.20 Target price: A$7.50 Previous target: A$8.00 Up/downside: -8.5% Reuters: GNC.AX Bloomberg: GNC AU Market cap: US$1,396m A$1,877m Average daily turnover: US$9.41m A$12.38m Current shares o/s 228.9m Free float: 100.0%

Price performance 1M 3M 12M

Absolute (%) 3.4 -0.3 -18.7 Relative (%) 3.1 -2.9 -24.4

Belinda MOORE

T (61) 7 3334 4532

E [email protected] Kurt GELSOMINO

T (617) 3334 4858

E [email protected]

Analyst(s) own shares in the following stock(s) mentioned in this report: – N/A

Financial Summary Sep-16A Sep-17A Sep-18F Sep-19F Sep-20F

Revenue (A$m) 4,158 4,576 4,126 4,303 4,522Operating EBITDA (A$m) 255.5 390.1 243.5 256.5 317.0Net Profit (A$m) 30.9 125.2 58.4 49.6 97.5Normalised EPS (A$) 0.23 0.62 0.25 0.22 0.42Normalised EPS Growth 18% 168% (59%) (15%) 97%FD Normalised P/E (x) 35.72 13.31 32.25 38.01 19.34DPS (A$) 0.11 0.30 0.16 0.11 0.21Dividend Yield 1.34% 3.66% 1.95% 1.34% 2.59%EV/EBITDA (x) 10.78 6.62 10.72 9.94 7.67P/FCFE (x) NA 15.25 NA NA 36.03Net Gearing 50.0% 37.4% 38.8% 35.1% 28.1%P/BV (x) 1.08 1.01 1.01 1.00 0.97ROE 2.96% 7.86% 3.14% 2.65% 5.09%% Change In Normalised EPS Estimates (7.2%) (42.2%) (19.1%)Normalised EPS/consensus EPS (x) 0.98 0.58 0.87

65.070.776.482.187.993.699.3105.0

6.907.407.908.408.909.409.90

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Price Close Relative to S&P/ASX 200 (RHS)

Source: Bloomberg

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Insurance - General│Australia│Equity research│June 19, 2018


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Insurance Australia Group

Waving goodbye to parts of Asia

IAG has announced the sale of its operations in Thailand, Indonesia and Vietnam. ■ The joint sale price for IAG’s Thailand and Indonesia operations (A$525m) looks a ■

good outcome, in our view.

IAG’s pro-forma CET1 capital level of 1.2x at December 2017 implies, at that date, ■IAG had ~$200m of excess capital above the top of its target capital range, on our estimates.

Our IAG cash EPS forecasts are largely unchanged in FY18 and lowered by ~1% ■in future years.

Maintain Hold call. IAG has a good near-term story, but remains expensive ■trading on ~20x FY19F PE.

What happened IAG has announced the sale of its operations in Thailand, Indonesia and Vietnam. IAG’s sale of its Thailand and Indonesia operations was to Tokio Marine for A$525m, while the Vietnam disposal was a separate transaction. All transactions close in FY19, with IAG to record an after tax profit on sale of at least A$200m, as an unusual item in that year. Based on IAG’s capital level at 31 December 2017, these asset sales add 13bps to IAG’s CET1 capital ratio. On a pro-forma basis, after allowing for the interim dividend, IAG’s CET1 ratio at 31 December 2017 would have been 1.2x versus management’s target range of 0.9-1.1x.

A good exit price for Thailand and Indonesia, buyback imminent The sale price (A$525m) for IAG’s Thailand and Indonesia operations looks a good outcome, in our view. We estimate it equates to a multiple of 51x average operating earnings (pre-development costs) from these businesses over the last three years (FY15-FY17). On capital, IAG’s pro-forma CET1 capital level of 1.2x at December 2017 implies, at that date, IAG has about A$200m of excess capital above the top of its target capital range (0.9x-1.1x), on our estimates. With IAG to see further capital benefits near term from recent quota share arrangements and reversal of NZ tax losses, we remain comfortable we our forecast for a A$300m buyback at the FY18 result.

Minor earnings changes Per guidance, we now treat the disposed of Asian businesses as discontinued operations below the line. We also treat the profit on sale as a non-recurring item. As a result of this our IAG cash EPS forecasts are largely unchanged in FY18, but lowered by ~1% in future years. Our IAG insurance margin forecasts benefit by 30bps-60bps in all years with the disposed of businesses being lower margin. Our valuation rises to A$7.54 on a valuation roll-forward.

Investment view – good near-term story but expensive IAG continues to execute well with its near-term cost-out plans, and potential capital management, creating a nice stock story into FY19/FY20, in our view. However trading on ~20x FY19F PE, we see IAG as being expensive for an insurance company with significant expectation now built into its share price. Hold call maintained.

SOURCE: MORGANS ESTIMATES

▎Australia

HOLD (no change) Current price: A$8.22 Target price: A$7.54 Previous target: A$7.19 Up/downside: -8.3% Reuters: IAG.AX Bloomberg: IAG AU Market cap: US$14,473m A$19,461m Average daily turnover: US$27.25m A$35.81m Current shares o/s 2,071m Free float: 100.0%


Absolute (%) -0.7 5.2 27.2 Relative (%) -1 2.6 21.5

Richard COLES

T (61) 2 9043 7911

E [email protected]


Financial Summary Jun-16A Jun-17A Jun-18E Jun-19E Jun-20E

Gross Written Premium 11,367 11,439 11,527 11,937 12,257Net Premium (A$m) 8,228 8,199 7,738 7,331 7,528Net Prof it (A$m) 870 990 1,152 1,040 1,078Normalised EPS (A$) 33.9 38.7 45.8 41.8 43.5Normalised EPS Growth -14.9% 14.0% 18.5% -8.8% 3.9%FD Normalised P/E (x) 24.9 21.9 18.4 20.2 19.4DPS (c) 36.0 33.0 34.5 32.8 34.0Div idend Yield 4.3% 3.9% 4.1% 3.9% 4.0%P/BV (x) 3.1 3.0 2.9 2.6 2.4ROE (%) 13.0% 15.1% 17.3% 14.5% 13.8%

93.098.8104.7110.5116.3122.2128.0

5.906.406.907.407.908.408.90


Source: Bloomberg

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Oil & Gas Exp & Prodn│Australia│Equity research│June 19, 2018


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Otto Energy

Cash flow on sale

We initiate research coverage on OEL with an Add rating and A$0.11 per share ■price target.

SM 71 is on track to contribute eight years of solid cash flow generation for OEL, ■which it will primarily use to reinvest in a portfolio of new prospects.

OEL is working to expand its Houston footprint to maximise access to deal flow on ■new prospects.

A decision on VR232 is expected soon, which OEL may select as its next ■exploration prospect. This is not included in our valuation.

OEL offers a de-risked production profile with further upside from ongoing ■exploration.

Initiate coverage with Add rating We initiate research coverage on Otto Energy (OEL) with an Add recommendation and valuation-derived price target of A$0.11 per share. Our valuation is based on: 1) a DCF on SM 71, 2) a 30% risk-weighted conceptual DCF on Bivouac Peak East, 3) zero value for Bivouac Peak Deep (given success is contingent on BP East), and 4) A 20% risk-weighted in situ resource metric applied to OEL’s Alaskan Big Bear acreage. Key risks to our call include oil price and future exploration results, both of which will remain important catalysts for the stock.

SM 71 cash flow generation Oil production results from SM 71 (4,650 bopd) have given OEL confidence that it can sustain solid cash flow generation for its estimated eight-year project life. We assume a new production well every ~two years at a gross cost of US$7.5m/well to produce forecast gross oil reserves of 11mmbbl. This should also result in little decline over the life of the operation. A DCF model on SM 71 (WACC 10%) generates a valuation on OEL’s equity share of US$84m (or A$0.067ps). This leaves OEL priced on an equivalent of 3.2x FY20 FCF.

Portfolio approach With SM 71 production generating significant free cash flow, we expect OEL will start to step up its level of investment and participation in new exploration plays. We expect this will proceed outside of its current agreement with BYE, which in 2016 formed an agreement to let OEL farm into four exploration plays (selected by OEL) in return for funding.

Bivouac Peak and Alaska potential kickers Bivouac Peak will be the third BYE prospect OEL will participate in, with drilling expected in FY19. If successful, this could conceivably drive an approximate doubling of OEL’s oil production. Meanwhile in 2015 OEL also acquired minority interests in prospective Alaska North Slope acreage, while highly prospective we would expect OEL to likely monetise its interests in a success scenario given the large-scale nature of oil projects in this region of Alaska.

SOURCE: MORGANS, COMPANY REPORTS

▎Australia

ADD Current price: A$0.060 Target price: A$0.11 Previous target: A$ Up/downside: 79.4% Reuters: OEL.AX Bloomberg: OEL AU Market cap: US$68.31m A$91.86m Average daily turnover: US$0.63m A$0.82m Current shares o/s 1,184m Free float: 73.4%


Absolute (%) -15.5 7.1 114.3

Relative (%) -15.8 4.7 109.2

Adrian PRENDERGAST

T (61) 3 9947 4134

E [email protected]


Financial Summary Jun-16A Jun-17A Jun-18F Jun-19F Jun-20F

Revenue (US$m) 0.00 0.00 9.47 39.05 39.05Operating EBITDA (US$m) -20.17 -5.25 -0.83 24.23 32.23Net Profit (US$m) -20.17 -5.30 -2.72 13.79 20.84Normalised EPS (US$) (0.017) (0.004) (0.002) 0.008 0.012Normalised EPS Growth (73.8%) (60.3%) 51.2%FD Normalised P/E (x) NA NA 5.20 3.60DPS (US$) - - - - - Dividend Yield 0% 0% 0% 0% 0%EV/EBITDA (x) NA NA NA 2.20 0.82P/FCFE (x) NA NA 4.35 2.79Net Gearing (90.4%) (70.5%) 20.0% (45.7%) (71.1%)P/BV (x) 2.34 3.05 2.87 1.58 1.10ROE (26.6%) (13.2%) 38.7% 36.0%% Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)

64100135171207243278314

0.0180.0280.0380.0480.0580.0680.0780.088


Source: Bloomberg

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Company Note Gas Transmission & Dist│Hong Kong│June 19, 2018



Insert Insert

China Gas Plenty of growth potential ahead ■ We expect net profit to grow 48% in FY18F after fine-tuning our earnings forecasts. ■ We expect rural and urban household connections to see a 6% CAGR from FY18F to

FY23F, driven by rapid urbanisation and signing of more rural gas supply contracts. ■ China Gas’s new venture into distributed energy could be an additional new driver. ■ We raise our DCF-based target price due to better long-term growth prospects. ■ We expect strong growth in household connections and gas sales to be triggers.

Maintain Add.

We expect FY18F net profit to grow 48% yoy China Gas will report FY3/18F results on 22 Jun 2018. Last week, it issued a positive profit alert with FY18F net profit expected to rise by over 45%. We raise FY18F net profit forecast by 0.3% as we think gas sales volumes could be slightly higher than our previous expectation. We now expect net profit to grow by 47.6% yoy to HK$6.1bn on the back of a 34% increase in gas sales volume. We expect the gas sales dollar margin to drop by 8.9% to Rmb0.617/cubic metre due to high gas cost in the winter. Rural and urban household connections will continue to grow We think management will provide an update on the five-year rural connection targets due to the government’s push for clean energy in winter space heating and signing of a large number of rural gas supply contracts. We expect China Gas will connect to 12.6m rural households in FY18-23F (vs. our previous forecast of 9.4m). We also project its city gas household connection will grow at 3-5% p.a. in FY18-23F on the back of the rapid urbanisation of small cities and in NE China, which are the company’s key markets. Northeast China could be a new and key driver The China-Russia East Natural Gas Pipeline is scheduled to be completed by end-2019. We expect it to be able to supply 30bcm/yr natural gas to NE China within the first five years. China Gas has 73-75% market share in Heilongjiang and Liaoning. Harbin, the company’s key project there, targets 6bcm/yr gas consumption within the first five years and other cities have similar ambitious plans. We expect China Gas will achieve 16.5bcm gas sales in NE China in FY25F and account for 37% of the group’s total gas sales. Expanding into distributed energy In the last few years, China Gas has been working on gas-fired combined cooling, heating and power (CCHP) projects with initial success. This is an integrated energy solution for industrial users with high energy efficiency and energy savings. We think that in the next few years, China Gas will roll out CCHP ventures in its industrial park projects. China Gas expects CCHP projects to deliver 10-12% IRR when fully ramped up.

Target price raised to HK$38.00/share We raise FY18-20F EPS slightly as we expect better FY18F gas sales volume, which is offset by the drop in gas sales margin. In the longer term, we expect EPS to grow at a 13.8% CAGR in FY21-23F (vs. previous forecast of 9.6%). With the higher long-term earnings growth, our DCF-based target price is raised from HK$28.50 to HK$38.00 (WACC 7.9%), translating into CY18F implied P/E of 25x and CY19F of 20x.

Reiterate Add rating We maintain an Add rating despite the 143% share price increase in the last 12 months. We expect the solid growth in rural and urban connections, strong gas sales growth and the new venture into distributed energy to trigger a further re-rating. Key risks are margin pressure in the winter season and slow payment of subsidies by local governments.


Hong Kong

ADD (no change) Consensus ratings*: Buy 12 Hold 7 Sell 3

Current price: HK$31.45 Target price: HK$38.00 Previous target: HK$28.50


Reuters: 0384.HK Bloomberg: 384 HK Market cap: US$19,907m HK$156,260m Average daily turnover: US$21.13m HK$167.3m Current shares o/s: 4,985m Free float: 25.2% *Source: Bloomberg Key changes in this note

FY18F EPS increased by 0.3%. FY19F EPS increased by 0.3%. FY20F EPS increased by 0.4%.

Source: Bloomberg


Absolute (%) 4.7 24.3 143.4 Relative (%) 9.8 30.8 129.7

Major shareholders % held Beijing Enterprises Group 21.1 China Gas Group 15.4 SK E&S 15.1 Insert

Analyst(s)

Keith LI

T (852) 2532 1110 E [email protected]

Financial Summary Mar-16A Mar-17A Mar-18F Mar-19F Mar-20F

Revenue (HK$m) 29,497 31,993 45,374 57,455 70,097Operating EBITDA (HK$m) 4,520 6,217 8,759 11,168 13,291Net Profit (HK$m) 2,273 4,148 6,123 7,984 9,684Core EPS (HK$) 0.46 0.85 1.23 1.61 1.95Core EPS Growth (32.0%) 84.6% 45.8% 30.4% 21.3%FD Core P/E (x) 68.69 37.22 25.52 20.56 16.95DPS (HK$) 0.19 0.25 0.37 0.51 0.66Dividend Yield 0.62% 0.79% 1.18% 1.63% 2.11%EV/EBITDA (x) 36.93 26.79 19.31 15.02 12.40P/FCFE (x) 66.7 103.5 87.4 36.3 33.7Net Gearing 79.0% 76.8% 66.1% 51.1% 36.3%P/BV (x) 8.65 7.60 6.11 4.93 4.02ROE 12.5% 21.6% 26.6% 27.9% 27.4%% Change In Core EPS Estimates 0.309% 0.279% 0.355%CIMB/consensus EPS (x) 1.00 1.06 1.09

83

150

216

283

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20.0

30.0

40.0Price Close Relative to HSI (RHS)

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Company Note Ind Goods & Services│Malaysia│June 19, 2018 Shariah Compliant



Insert Insert

AWC Berhad Chugging along nicely, thanks to IFM segment ■ We recently met up with AWC’s management to obtain updates about the company’s

earnings prospects as well as the status of its proposed acquisition of Trackworks. ■ Contribution from integrated facilities management (IFM) segment should remain

strong, thanks to a higher orderbook and maiden contribution from CARP concession. ■ We expect lower yoy contribution from the environment segment given headwinds in

terms of slower progress billings as well as increased competition in Singapore. ■ AWC still aims to conclude the acquisition of a 60% stake in Trackworks by end-3Q18

as the acquisition would be earnings-accretive and a good fit for its rail division. ■ Maintain Add, with TP of RM1.00 (11.2x CY19F P/E).

Robust IFM segment, thanks to higher orderbook and CARP We gather that AWC expects its IFM segment to continue to perform strongly, given: i) better economies of scale, ii) increase in orderbook, and iii) higher recognition from its Critical Asset Refurbishment Programme (CARP). CARP is a 10-year programme (Jan 2016 to Dec 2025) for the replacement of old mechanical and electrical (M&E) equipment in government buildings at a pre-agreed schedule. The government pays AWC on a monthly basis but AWC will only recognise the payment as earnings when work is done.

Focusing on securing more non-concession IFM jobs Moving forward, AWC plans to secure more private jobs in the IFM segment, especially in the healthcare and commercial segments. AWC believes its experience and strong track-record would make it very competitive in securing more private IFM jobs. Also, margins for private IFM contracts are also generally higher vs. concession projects. For the IFM segment, we estimate that 55% of its existing total orderbook, including the CARP concession (up to Dec 2025), are for government facilities.

Headwinds in the environment division In the environment segment, delays in progress billings led to a weak 9MFY6/18 performance. As AWC's STREAM automated waste collection systems are installed towards the end of a construction project, unforeseen delays by the project's main contractors resulted in slower progress billings. Also, emergence of new players in this segment in Singapore had led to a more competitive environment there. However, AWC remains confident that the superior quality of its products will set it apart from its peers.

Delays to its proposed acquisition of 60% stake in Trackworks AWC recently announced it has extended its target completion date for the acquisition of a 60% stake in Trackworks by three months to 26 Sep 2018. This was in relation to a demand letter for RM19m in damages served by a customer to Trackworks' vendors and international principal. According to AWC, any potential liability from this demand letter would likely be borne solely by the aforementioned principal. In our view, AWC is likely to complete this acquisition given its plans to venture into the rail business. Maintain Add As there were no surprises from our meeting, we make no changes to our earnings estimates. We also retain our Add call, and TP of RM1.00, based on 11.2x CY19F P/E, a small-cap and liquidity discount of 10% to its larger peer UEM Edgenta's 12.4x. We continue to like AWC for its defensive earnings and undemanding valuation of 7.3x CY19F P/E. Potential re-rating catalysts are stronger-than-expected contribution from environment segment and more contract wins in IFM segment. Downside risks: i) cancellation of its facilities management contracts, and ii) delays in progress billing.

SOURCES: CIMB RESEARCH, COMPANY REPORTS

Malaysia


Current price: RM0.67 Target price: RM1.00 Previous target: RM1.00


Reuters: AWCF.KL Bloomberg: AWCF MK Market cap: US$44.82m RM179.2m Average daily turnover: US$0.08m RM0.32m Current shares o/s: 256.0m Free float: 62.1% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg


Absolute (%) -6.3 -17.4 -39 Relative (%) -0.3 -11.8 -36.3

Major shareholders % held K-Capital Sdn Bhd 30.7 Ignatius Luke Jr Tan Keng Hee 4.2 Ahmad Kabeer bin Mohamed Nagoor 3.0 Insert

Analyst(s)

Walter AW


Financial Summary Jun-16A Jun-17A Jun-18F Jun-19F Jun-20F

Revenue (RMm) 249.3 296.1 313.9 331.0 355.5Operating EBITDA (RMm) 31.90 45.94 42.29 44.78 47.67Net Profit (RMm) 17.30 21.59 21.15 22.74 24.22Core EPS (RM) 0.068 0.069 0.083 0.089 0.095Core EPS Growth 89.8% 2.3% 19.6% 7.5% 6.5%FD Core P/E (x) 9.84 9.62 8.05 7.49 7.03DPS (RM) 0.025 0.020 0.025 0.030 0.035Dividend Yield 3.76% 3.01% 3.76% 4.51% 5.26%EV/EBITDA (x) 4.76 3.23 3.59 3.33 3.10P/FCFE (x) 24.65 5.36 19.33 10.36 10.26Net Gearing (32.0%) (34.6%) (32.2%) (33.7%) (34.3%)P/BV (x) 1.43 1.30 1.17 1.06 0.97ROE 16.4% 14.1% 15.3% 14.8% 14.4%CIMB/consensus EPS (x) 0.96 0.97 1.00

52.0

69.5

87.0

104.5

122.0

0.50

0.70

0.90

1.10

1.30Price Close Relative to FBMKLCI (RHS)

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Company Flash Note Oil & Gas - Retail│Singapore│June 19, 2018



Insert Insert

China Aviation Oil Streamlining its associate portfolio ■ China Aviation Oil (CAO) announced the intention to dispose of its entire 39% equity

interest in China Aviation Oil Xinyuan Petrochemicals Co Ltd (Xinyuan). ■ Xinyuan is a minor contributor to CAO’s share of associates profit; hence sale will

have negligible impact on CAO’s profitability, in our view. ■ Maintain Add and TP, based on 12.5x CY19F P/E (c.20% discount to peer average).

Disposing of Xinyuan interest via listing-for-sale ● As CAO is a subsidiary of a China state-owned enterprise (SOE), the proposed

disposal will be via a listing-for-sale through the Beijing Equity Exchange. No tentative completion deadline was disclosed.

● Back in FY07, CAO disposed of a 41% stake (out of its total 80% stake then) in Xinyuan to Shenzhen Juzhengyuan Petrochemical Co Ltd (Juzhengyuan), then a 19%-stake owner in Xinyuan, for Rmb20.5m (~S$4.3m). The sale was on a “willing-buyer willing-seller” basis and at the original acquisition price CAO invested in Xinyuan in FY04, despite Xinyuan being a loss-making company.

● Xinyuan is mainly engaged in the storage tank leasing and trade of oil products in Southern China. Its key asset is a storage tank farm located in the city of Maoming, Guangdong Province, China with a total storage capacity of 79,000m3. In FY17, it reported utilisation leasing rate of 99%.

● Besides CAO, other current Xinyuan shareholders are Juzhengyuan with 60% stake, and China National Aviation Fuel Holding Company (CNAF) with a 1% stake.

Minor impact on CAO’s share of associates profit and net cash ● In 1Q18, Xinyuan contributed US$0.2m, or a mere 0.9%, to CAO’s share of associates

profit of US$21.0m. Over FY08-17, Xinyuan has on average accounted for 1.6% of CAO’s share of associates profit, with its highest contribution at US$1.6m in FY14, but only due to reversal of prior year impairment provisions made. Hence, its disposal will have a negligible impact on CAO’s future associate profits, in our view.

● Assuming the sale is performed on a similar basis as in FY07, this could reap CAO Rmb19.3m (~US$3m), still a minor sum given that CAO had a net cash of US$171.5m (19.8UScts/share) as at end-1Q18.

● We believe the proposed sale could be CAO’s way of streamlining its portfolio assets, especially since it has exited the petrochemical trading business.

Focus will still be on SPIA ● Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA)

continues to be CAO’s associate gem and accounted for 90.1% of its 1Q18 associate earnings.

● The Shanghai Pudong airport started trial runs on its fifth runway at end-17; this could drive FY18F refuelling volumes for SPIA.

● SPIA's 2019F volumes could grow further with the completion of the airport's satellite terminal to boost passenger capacity to 80m.

Poised for M&A opportunities ● CAO highlighted in end-17 that it is seeking synergistic M&A opportunities as it intends

to expand its global jet supply and trading network. We are positive on CAO's expansion beyond being just a China-centric player.

Maintain Add and TP of S$2.03 ● We continue to favour CAO as a proxy for China’s growing outbound travel, as well as

its expanding international footprint and healthy balance sheet. ● Our TP is still based on 12.5x CY19F P/BV, c.20% discount to peer average of 15.8x

to reflect its smaller market cap. ● Potential re-rating catalysts are higher product volumes and associate earnings, and

possibility of M&As to fuel inorganic growth. Downside risks to our call include lower volumes, margins and associate earnings.

Figure 1: Xinyuan Petrochemical’s % historical profit contribution


FYE Dec (US$m) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

CAO's associate earnings 10.5 24.2 37.6 40.2 43.2 46.5 43.2 42.3 66.4 71.5

Xinyuan Petrochemical contribution 0.1 0.3 0.8 1.1 0.6 0.5 1.6 0.7 0.3 0.6

Xinyuan % contribution 1.0% 1.2% 2.1% 2.8% 1.5% 1.0% 3.6% 1.5% 0.5% 0.8%

Singapore June 19, 2018 - 6:07 PM


Current price: S$1.56 Target price: S$2.03 Previous target: S$2.03


Reuters: CNAO.SI Bloomberg: CAO SP Market cap: US$998.6m S$1,349m Average daily turnover: US$0.50m S$0.66m Current shares o/s 866.2m Free float: 28.9% *Source: Bloomberg Key financial forecasts

Source: Bloomberg Price performance 1M 3M 12M

Absolute (%) -4.3 0 -6 Relative (%) 1.5 5.4 -8.9

Major shareholders % held China National Aviation Fuel Grp 51.0 BP PLC 20.1 Insert

Analyst(s)

Cezzane SEE T (65) 6210 8699 E [email protected] LIM Siew Khee T (65) 6210 8664 E [email protected]

Dec-18F Dec-19F Dec-20FNet Profit (US$m) 92.4 100.5 110.9Normalised EPS (US$) 0.11 0.12 0.13Normalised EPS Growth 7.9% 8.8% 10.4%FD Normalised P/E (x) 10.83 9.95 9.02Recurring ROE 12.2% 12.2% 12.4%P/BV (x) 1.27 1.16 1.07DPS (US$) 0.032 0.035 0.037Dividend Yield 2.77% 3.01% 3.21%

78.0

84.7

91.3

98.0

104.7

1.400

1.500

1.600

1.700

1.800

Price Close Relative to FSSTI (RHS)

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Company Note Food & Beverages│Thailand│June 19, 2018 Shariah Compliant



Insert Insert

Thai Vegetable Oil Strong fundamentals amid uncertainties ■ We believe the increase in import tariff on soybean by China will have a limited impact

on TVO. ■ Amid falling soybean meal prices, TVO’s GPM should remain high due to the

continuing wide spread between soybean meal and soybean prices. ■ We expect a strong 2Q18F core net profit of THB565m (+172% yoy, +1.3% qoq),

thanks to its low soybean cost and increasing ASP. ■ Maintain Add on strong earnings growth outlook and attractive dividend yield (6.6%).

Opportunity in crisis Despite a slump in soybean meal (SBM) and soybean (SB) prices, TVO still enjoys a wide spread between SBM and SB prices. It could also sell the SB purchased from Brazil to Chinese buyers and restock its inventory with lower-cost SB from the US. If this materialises, TVO’s GPM could widen in 3Q18F due to the lower-cost US soybean. Based on SB spot prices, we expect TVO to gain THB70m-140m (3.5-7% upside to our FY18F earnings) from the sale of 1-2 of its shipments from Brazil to Chinese buyers.

Concerns over Chinese tariff hike priced in China announced in Jun that it will impose a 25% import tariff (currently 3%) from 6 Jul on 545 products from the US, including SB. China is the world’s largest importer and US’s largest buyer (about 60% of US soybean exports go to China annually). We believe this is priced in as SB and SBM prices are already down 13.3% and 12.8% QTD, respectively, while the current SB price is now below US farmers’ break-even price.

Soybean demand remains strong The demand for US soybeans remains strong despite China’s threat to raise tariffs. After China cancelled several shipments of US soybean in the last month, those shipments were re-routed to Vietnam. This implies that US soybean exports are not entirely dependent on China. We do not expect a massive decline in US SB exports as it supplies 37% of the global SB trade. Therefore, we expect China will eventually have to buy SB from the US. Note that Brazil soybean crops are available only during Feb-Oct while US soybean normally harvests in Sep-Jan.

Expect strong 2Q18F results We estimate a strong 2Q18 core net profit of THB565m (+172% yoy, +1.3% qoq), driven by a wider GPM. We project moderate sales growth of 3% yoy in 2Q18F, driven by increasing ASP which should more than offset its lower sales volume from longer-than-usual maintenance shutdown. We expect GPM to reach 15.2% in 2Q18F vs. 14.4% in 1Q18 and 8% in 2Q17. This should be supported by its low SB cost and increasing ASP.

Cushioned by attractive dividend yield Despite the potentially strong earnings in 2Q18F and an attractive dividend yield, the share price is down 17% QTD amid concerns over the potential US-China trade war. Given that we expect the net impact from the tariff hike to be small for Thai SB crushers, the downside for TVO’s share price appears to be limited. We expect TVO to announce an interim dividend of THB1.1/share (3.9% dividend yield) in Aug.

Maintain Add We maintain Add and our target price of THB38.75, still based on 16.3x CY19F P/E (+1 s.d. from 5-year mean). Our Add rating is justified by 1) projected EPS growth of 42.5% in FY18F, 2) potentially strong 2Q18F results and 3) its attractive dividend yield of 6.6% in FY18F. Downside risks include 1) a negative spread between SBM and SB prices, and 2) intensified competition in the domestic market.


Thailand


Current price: THB28.50 Target price: THB38.75 Previous target: THB38.75


Reuters: TVO.BK Bloomberg: TVO TB Market cap: US$704.9m THB23,045m Average daily turnover: US$2.06m THB65.31m Current shares o/s: 808.6m Free float: 44.4% *Source: Bloomberg Key changes in this note

No change.

Source: Bloomberg

Price performance 1M 3M 12M Absolute (%) -9.5 -18 -7.3 Relative (%) -5.2 -10.7 -13.8

Major shareholders % held Thai NVDR Co Ltd 10.1 Ms. Sudarat Vitayatanagorn 7.6 Mr. Vichai Vitayatanagorn 7.3 Insert

Analyst(s)

Tanida JIRAPORNKASEMSUK


Financial Summary Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F

Revenue (THBm) 28,243 24,568 26,740 27,373 28,876Operating EBITDA (THBm) 3,516 1,736 2,599 2,671 2,924Net Profit (THBm) 2,755 1,327 1,891 1,932 2,126Core EPS (THB) 3.41 1.64 2.34 2.39 2.63Core EPS Growth 44.8% (51.8%) 42.5% 2.2% 10.1%FD Core P/E (x) 8.37 17.37 12.19 11.93 10.84DPS (THB) 2.75 1.31 1.87 1.91 2.10Dividend Yield 9.65% 4.61% 6.56% 6.71% 7.38%EV/EBITDA (x) 6.33 13.77 9.07 8.79 8.03P/FCFE (x) 10.37 NA 13.86 18.77 17.69Net Gearing (12.9%) 5.6% 0.5% (1.2%) (1.9%)P/BV (x) 2.70 2.81 2.75 2.63 2.51ROE 34.3% 15.9% 22.8% 22.5% 23.7%% Change In Core EPS Estimates 0% 0% 0%CIMB/consensus EPS (x) 0.93 0.91 0.95

76.0

88.5

101.0

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30.0

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Price Close Relative to SET (RHS)

5101520


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Asia Pacific Daily │ Equity Research │ June 20, 2018

REGIONAL HEAD

Bertram LAI Regional Head of Research +852 2532 1111 [email protected]

COUNTRY HEADS OF RESEARCH

Ivy NG, CFA Siew Khee. LIM Erwan TEGUH Kasem PRUNRATANAMALA, CFA Raymond CHENG Malaysia Singapore Indonesia Thailand Hong Kong/China +60 (3) 2261-9073 +65 6210-8664 +62 (21) 3006-1720 +66 (2) 657-9221 +852 2539-1324 [email protected] [email protected] [email protected] [email protected] [email protected] Dohoon LEE Satish KUMAR South Korea India +82 (2) 6730-6121 +91 (22) 6602-5185 [email protected] [email protected] Yolan SEIMON Anirban LAHIRI Sri Lanka Vietnam +94 (11) 230-6273 +8428 7300-0688 (ext: 21242) [email protected] [email protected] Coverage via partnership arrangement with John Keells Stock Brokers

Coverage via partnership arrangement with VNDirect Securities Corporation

REGIONAL SECTOR HEADS

KJ KWANG Ivy NG, CFA Raymond YAP, CFA Offshore & Marine Plantations Transportation +82 (2) 6730-6123 +60 (3) 2261-9073 +60 (3) 2261-9072 [email protected] [email protected] [email protected]

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subsidiaries and related corporations. The term “SB Equities Inc.” shall, unless the context otherwise requires, mean each of SB Equities Inc. and its affiliates, subsidiaries and related corporations. The term “Morgans Financial Limited” shall, unless the context otherwise requires, mean each of Morgans Financial Limited and its affiliates, subsidiaries and related corporations. The term “CIMB” shall denote CIMB Investment Bank Berhad, being the entity distributing or disseminating the report in Malaysia, or, in every other case, CIMBG and its affiliates, subsidiaries and related corporations. The term “CGS-CIMB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case except as otherwise stated herein, CGS-CIMB Securities International Pte. Ltd. and its affiliates, subsidiaries and related corporations.

CGS-CIMB

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CIMB

Country CIMB Entity Regulated by Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia

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CGS-CIMB Securities (Hong Kong) Limited. The views and opinions in this research report are of CGS-CIMB, CIMB, John Keells, SBE or Morgans, as the case may be, as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CHK. 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In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea (“FSCMA”). Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities. CGS-CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services.

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Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research). Thailand: This report is issued and distributed by CGS-CIMB Securities (Thailand) Co., Ltd. (“CGS-CIMB Thailand”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CGS-CIMB Thailand has no obligation to update its opinion or the information in this research report. CGS-CIMB Thailand may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions. AAV, ADVANC, AMATA, ANAN, AOT, AP, BA, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEC, BEM, BJC, BH, BIG, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DTAC, EA, EGCO, EPG, ESSO, GGC, GFPT, GLOBAL, GPSC, GUNKUL, HANA, HMPRO, INTUCH, IRPC, ITD, IVL, JMART, JWD, KBANK, KCE, KKP, KTB, KTC, LH, LPN, MAJOR, MC, MEGA, MINT, MONO, MTLS, ORI, PSH, PSL, PTG, PTT, PTTEP, PTTGC, QH, ROBINS, SAWAD, SCB, SCC, SGP, SIRI, SPALI, SPRC, STA, STEC, SUPER, TASCO, TCAP, THAI, THCOM, TISCO, TKN, TMB, TOP, TPIPL, TPIPP, TRUE, TTA, TU, TVO, UNIQ, UV, WHA, WHAUP, WORK. Corporate Governance Report: 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 evaluation 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. CGS-CIMB Thailand does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result Description: Excellent Very Good Good N/A

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Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2017, Anti-Corruption 2017 AAV – Very Good, n/a, ADVANC – Excellent, Certified, AEONTS – Good, n/a, AMATA – Very Good, n/a, ANAN – Excellent, n/a, AOT – Excellent, Declared, AP – Excellent, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Excellent, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – Good, Declared, BCP - Excellent, Certified, BCPG – Very Good, n/a, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, n/a, BEC – Very Good, n/a, , BGRIM – not available, n/a, BH - Good, n/a, BJC – Very Good, Declared, BJCHI – Very Good, Declared, BLA – Very Good, Certified, BPP – Good, n/a, BR - Good, Declared, BTS - Excellent, Certified, CBG – Good, n/a, CCET – Good, n/a, CENTEL – Very Good, Certified, CHG – Very Good, Declared, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, n/a, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, n/a, ECL – Very Good, Certified, EGCO - Excellent, Certified, EPG – Very Good, n/a, GFPT - Excellent, Declared, GGC – not available, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Excellent, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Certified, ICHI – Excellent, n/a, III – not available, n/a, INTUCH - Excellent, Certified, IRPC – Excellent, Certified, ITD – Very Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Very Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Certified, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Certified, M – Very Good, n/a, MACO – Very Good, n/a, MAJOR – Very Good, n/a, MAKRO – Very Good, Declared, MALEE – Very Good, n/a, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Certified, MEGA – Very Good, n/a, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Excellent, Declared, PLAT – Very Good, Certified, PSH – Excellent, Certified, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Certified, RATCH – Excellent, Certified, ROBINS – Excellent, Certified, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Very Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Very Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI – Very Good, Declared, SPA - Good, n/a, SPALI - Excellent, n/a, SPRC – Excellent, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, n/a, TCAP – Excellent, Certified, THAI – Very Good, n/a, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Excellent, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Very Good, Declared, TMB - Excellent, Certified, TNR – Good, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Excellent, Declared, TTW – Very Good, n/a, TU – Excellent, Declared, TVO – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a. Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into: - Companies that have declared their intention to join CAC, and - Companies certified by CAC

Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition: Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation. Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition: Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

WJV#05

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