Regional Morning Notes - UTRADE 27 September 2017 Refer to last page for important disclosures. 3 Regional Morning Notes PE BAND - TENCENT PE BAND - NETEASE 5 10 15

Wednesday , 27 Sep tember 2017

1 Refer to last page for important disclosures.

R e g i o n a l M o r n i n g N o t e s

PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE.

CHINA Sector

Internet Page 2Gaming: NetEase game portfolio strengthening; Tencent to launch HoK on Switch.

MALAYSIA Update

My E.G. Services (MYEG MK/HOLD/RM2.03/Target: RM2.29) Page 5Foreign worker accommodation services on track to become MYEG’s largest division. Meanwhile, the company should be on track to deliver 30% earnings growth.

SINGAPORE Small/Mid Cap Highlights

Banyan Tree Holdings (BTH SP/BUY/S$0.62/Target: S$0.92) Page 8Key takeaways from marketing trip: Relaxing beneath the Banyan Tree.

THAILAND Update

Advanced Info Service (ADVANC TB/BUY/Bt193.00/Target: Bt220.00) Page 11Earnings momentum improving in 2H17.

KEY INDICES Prev Close 1D % 1W % 1M % YTD % DJIA 22284.3 (0.1) (0.4) 2.2 12.8 S&P 500 2496.8 0.0 (0.4) 2.2 11.5 FTSE 100 7285.7 (0.2) 0.1 (1.6) 2.0 AS30 5729.6 (0.2) (0.7) (1.3) 0.2 CSI 300 3820.8 0.1 (0.3) 0.7 15.4 FSSTI 3212.0 (0.1) (0.4) (1.5) 11.5 HSCEI 10968.4 0.5 (1.4) (2.8) 16.7 HSI 27513.0 0.0 (1.9) (1.2) 25.1 JCI 5864.0 (0.5) (0.4) (0.9) 10.7 KLCI 1765.6 (0.2) (1.0) (0.2) 7.5 KOSPI 2374.3 (0.3) (1.7) (0.2) 17.2 Nikkei 225 20330.2 (0.3) 0.2 4.5 6.4 SET 1669.8 0.1 (0.2) 6.0 8.2 TWSE 10257.0 (0.8) (3.0) (2.5) 10.8 BDI 1503 0.1 6.2 24.3 56.4 CPO (RM/mt) 2710 (2.4) (5.0) 0.0 (15.3) Brent Crude (US$/bbl)

58 (1.0) 6.0 11.5 2.9

Source: Bloomberg

TOP PICKS Ticker CP (lcy) TP (lcy) Pot. +/- (%) BUY CSPC Pharmaceutical 1093 HK 12.90 15.24 18.1 Hengan Intl 1044 HK 69.65 80.00 14.9 Ace Hardware ACES IJ 1,220.00 1,300.00 6.6 Waskita Karya WSKT IJ 1,835.00 3,000.00 63.5 Ekovest EKO MK 1.08 1.45 34.3 V.S. Industry VSI MK 2.61 3.10 18.8 OCBC OCBC SP 11.17 13.38 19.8 Siam Cement SCC TB 500.00 600.00 20.0

SELL Great Wall Motor 2333 HK 9.66 5.50 (43.1) UMW Holdings UMWH MK 5.46 4.80 (12.1)

KEY ASSUMPTIONS GDP (% yoy) 2016 2017F 2018F US 1.6 2.5 2.5 Euro Zone 1.7 1.8 1.6 Japan 1.0 0.9 1.2 Singapore 2.0 2.4 2.5 Malaysia 4.2 5.0 4.9 Thailand 3.2 3.3 3.3 Indonesia 5.0 5.2 5.5 Hong Kong 1.9 2.0 2.0 China 6.7 6.6 6.3 Brent (Average) (US$/bbl) 45 52 55 CPO (RM/mt) 2,653 2,600 2,400 Source: Bloomberg, UOB ETR, UOB Kay Hian

CORPORATE EVENTS

Venue Begin Close

Roadshow with China Yongda Canada/US 25 Sep 29 Sep Automobiles Services Holdings Site Visit with Xin Point Holdings China/Huizhou 27 Sep 27 Sep Roadshow with BBI Life Science Corp Hong Kong 27 Sep 28 Sep Conference Call with Thai Union Group Bangkok 29 Sep 29 Sep Asian Gems Conference 2017 Singapore 10 Oct 11 Oct UOB Kay Hian Annual Regional Strategy Kuala Lumpur 13 Nov 13 Nov Conference




SECTOR UPDATE

Internet – Gaming Gaming: NetEase Game Portfolio Strengthening; Tencent To Launch HoK On Switch

The list of top 10 grossing mobile games in August is vastly different from that in July on the launch of new games. Tencent has four games in the top 10, while NetEase has two, fewer than normal. In Aug-Sep 17, NetEase strengthened its game portfolio with the launch of Minecraft’s mobile version, while Tencent announced its plan to launch HoK on Nintendo’s game console Switch. Tencent remains our top pick. We favour Kingsoft in the longer term on growth contribution from its 2018 games pipeline. Maintain OVERWEIGHT on the sector.

WHAT’S NEW

Monthly grossing rank. In August, the top 10 grossing games on the iOS platform in China included four Tencent titles and two NetEase titles, according to App Annie. NetEase’s presence in the top 10 diminished, partly due to the launch of new games. We expect the number of NetEase’s games to recover in September as Onmyoji is approaching its one-year anniversary.

NetEase launches mobile version of Minecraft, while two PC client games are in the closed beta testing phase. NetEase launched Minecraft: Pocket Edition (PE) on 15 September. Globally, a total 40m copies of the mobile version has been sold since its inception at end-11. Monthly Active Users (MAU) of Minecraft has been maintained at a total of 55m across all platforms, according to Minecraft developer’s tweet in Feb 17. In terms of download ranking in China, the mobile game has been within the top five since its launch, showing promising player interest. NetEase is focusing on growing its player base by making the game free-to-play in China (sold at US$6.99 elsewhere) and offering gifts to international version players who switch to the China version. We expect little revenue contribution in the player accumulation stage. Over the longer term, we expect NetEase to benefit from revenue collected from: a) in-game purchases, b) server rental fees, and c) commissions from the distribution of player created game modifications. NetEase’s much anticipated PC client games, Conqueror’s Blade (战意) and Mysterious Sword (逆水寒), are in closed beta testing phase and will hopefully be launched in 2018.

Tencent to launch HoK on Nintendo Switch in the coming winter. Tencent announced that it will launch Honour of Kings (HoK) on Nintendo’s Switch this winter. With Nintendo expecting to see 10m in global sales volume by Mar 18, Switch will significantly extend HoK’s reach to more players in more regions. It is also suspected that Tencent may help Nintendo distribute Switch consoles and games in China, according to media reports.

Kingsoft, IGG mobile games’ overall performance stable. Kingsoft’s JX Online I Mobile’s grossing rank position was in the range of 10-25 for most of Aug-Sep 17, which is lower than the 7M17 level (5-20). The performance is roughly in line with our expectation given that it has been launched for more than one year. We think the postponement of the JX Online III Mobile launch has been priced in and we are optimistic on Kingsoft’s performance in 2018 with the launch of multiple new games. Kingsoft is currently trading 11.4x FY18F PE, below historical average. IGG’s Lords Mobile was ranked 10-50 in global major markets during the Aug-Sep 17 period, roughly on a par with the 7M17 level. IGG made it into the top 10 in July (as well as in 2Q17) in terms of revenue from iOS games in China, but did not make it into August’s top 10. IGG is currently trading at 7.6x FY18F PE, 0.5SD below historical level, due to concerns on the sustainability of the company’s growth.

OVERWEIGHT (Maintained)

STOCK PICKS Company Ticker Rec Share Price Target Price (LC) (LC) Tecnent 700 HK BUY 337.60 378.00 NetEase NTES US BUY 263.69 347.00 Kingsoft 3888 HK BUY 18.16 28.00 IGG 799 HK BUY 9.75 14.50

Source: Bloomberg, UOB Kay Hian

NETEASE & TENCENT PRECENCE IN TOP 10

0

1

2

3

4

5

6

Sep16

Oct16

Nov16

Dec16

Jan17

Feb17

Mar17

Apr17

May17

Jun17

Jul17

Aug17

Tencent Netease Source: App Annie, UOB Kay Hian

ANALYST(S)

Julia Pan +8621 5404 7225 ext 808 [email protected]

Pierce Qian +8621 5404 7225 ext 801 [email protected]

PEER COMPARISON Company Ticker Rec Current Price Target Market PE P/B EV/EBITDA ROE Dividend Yield 26 Sep 17

(LC) Price (LC)

Cap (US$m)

FY17F (x)

FY18F (x)

FY17F (x)

FY18F (x)

FY17F (x)

FY18F (x)

FY17F (%)

FY18F (%)

FY17F (%)

Tecnent 700 HK BUY 337.60 378.00 410,394.10 49.8 42.4 11.7 9.1 28.8 24.9 29.9 27.1 0.3 NetEase NTES US BUY 263.69 347.00 34,611.70 15.8 13.5 4.8 3.9 14.3 12.1 30.5 29.3 1.5 Kingsoft 3888 HK BUY 18.16 28.00 3,045.90 24.4 11.8 2.7 2.1 10.1 5.6 14.1 26.4 0.7 IGG 799 HK BUY 9.75 14.50 1,691.90 10.9 9.2 6.3 4.5 7.6 6.8 67.6 58.1 4.9

Source: Bloomberg, UOB Kay Hian




PE BAND - TENCENT PE BAND - NETEASE

5101520253035404550

1yr forward PE -1 Std DevMean +1 Std Dev

5

7

9

11

13

15

17

19

21


Source: Bloomberg, UOB Kay Hian Source: Bloomberg, UOB Kay Hian

PE BAND - KINGSOFT PE BAND - IGG

0

10

20

30

40

50

60

70


0

5

10

15

20

25

30


Source: Bloomberg, UOB Kay Hian Source: Bloomberg, UOB Kay Hian

CHINA IOS GAME GROSSING RANK Grossing rank Historical grossing rank Aug-17 vs Jul-17 Chinese name English name Publisher IP type Jul 17 Jun 17 May 17 Apr 17 Mar 17 Feb 17 Jan 17 1 = 王者荣耀 Honour of Kings Tencent Game 1 1 1 1 1 1 1 2 = 梦幻西游 Fantasy Westward

Journey Netease Game, Chinese

literature 2 2 2 2 3 3 3

3 = 天龙八部手游 TLBB Tencent Game, Chinese literature

3 3 5 - - - -

4 ▲1 魂斗罗:归来 Contra: Return Tencent Game 5 4 - - - - - 5 ▼1 倩女幽魂 Ghost Netease Game 4 5 3 4 5 4 4 6 = 胡莱三国 2 Hoolai Three

Kingdoms 2 Wanda Cinemas

Chinese Literature

6 - - - - - -

7 ▲ 仙剑奇侠传五 Chinese Paladin 5 Jgyou Game - - - - - - - 8 New 九州天空城 Novoland The Castle

in the Sky Perfect World Chinese novel,

TV series - - - - - - -

9 ▲ 寻仙 Journey to Fairyland Tencent Game - - - - - - - 10 ▲28 诛仙 Zhuxian Perfect World Novel - - - - - - -

Source: App Annie, UOB Kay Hian Note: Historical rank that below top 10 is shown as “-“




VIDEO GAME SOFTWARE COMPANY COMP SHEET Company Ticker Price

(LC) Average trading

Mkt Cap (US$ m)

Calendarised PE Calendarisd EV/EBITDA

Calendarised EV/Sales ROE 2017-20 3-year EPS

CAGR volume 2017F 2018F 2019F 2017F 2018F 2019F 2017F 2018F 2019F 2017F 2018F 2019F

US-listed global Internet & game companies Microsoft MSFT US 73.26 21.1 564,266 23.6 21.6 19.2 13.7 12.9 11.5 5.4 5.0 4.6 35.0 34.1 30.4 110.9% Time Warner TWX US 103.22 3.6 80,285 16.9 15.8 14.6 11.5 10.9 10.3 3.3 3.1 3.0 18.6 17.4 16.4 107.7% Activision Blizzard ATVI US 62.14 6.0 46,911 29.3 24.6 21.6 18.7 16.0 14.8 7.1 6.6 6.1 16.4 17.1 15.9 116.4% Electronic Arts EA US 114.2 2.5 35,257 27.4 23.5 20.6 18.5 16.9 14.6 6.4 6.1 5.6 28.0 32.5 34.9 115.4% Take-Two TTWO US 97.62 1.9 10,336 46.0 26.0 24.4 29.4 24.5 13.1 5.0 5.3 3.4 24.4 19.0 25.4 137.4% Zynga ZNGA US 3.81 9.9 3,297 41.0 30.2 24.9 20.7 15.1 12.3 3.1 2.8 2.5 5.1 6.8 8.3 128.3% Glu Mobile GLUU US 3.545 3.2 480 n.a. 45.4 18.7 n.a. 31.8 11.9 1.6 1.4 n.a. n.a. 7.8 16.8 n.a. Average 30.7 26.7 20.6 18.8 18.3 12.7 4.6 4.3 4.2 21.2 19.2 21.1 119.3%

US-listed Chinese Internet & game companies NetEase NTES US 263.69 1.3 34,612 16.6 14.0 12.0 12.4 10.5 8.8 3.6 2.9 2.4 29.9 28.0 25.7 117.4% YY YY US 77.47 1.6 4,790 12.8 10.7 9.0 9.9 8.0 6.8 2.6 2.1 1.8 35.0 30.0 29.1 119.2% Changyou.com CYOU US 39 0.2 2,038 10.0 9.9 9.9 5.6 5.7 5.8 2.1 2.0 1.9 17.4 14.6 12.1 100.2% Average 13.1 11.5 10.3 9.3 8.1 7.1 2.8 2.3 2.0 27.5 24.2 22.3 112.3%

HK-listed Chinese Internet & game companies Tencent 700 HK 337.6 20.6 410,384 42.8 33.3 26.5 30.1 23.6 18.8 11.7 8.6 6.8 29.7 28.9 27.8 127.0% Kingsoft 3888 HK 18.16 7.7 3,046 16.7 11.4 9.3 10.3 7.2 5.9 3.0 2.0 1.7 12.5 16.6 17.2 133.9% Netdragon 777 HK 25.6 3.5 1,629 179 46.3 47.0 51.5 29.3 20.9 2.8 2.2 1.8 1.8 5.3 6.9 2.0 IGG 799 HK 9.75 21.3 1,692 9.3 7.6 7.1 7.5 6.4 6.4 2.3 1.9 1.8 68.3 60.4 51.3 114.4% Tian Ge 1980 HK 5.77 8.3 955 16.6 13.7 10.9 n.a. n.a. n.a. 4.5 3.7 3.3 12.2 13.5 13.9 123.2% Boyaa 434 HK 3.08 1.9 302 6.2 5.8 5.8 1.8 1.7 1.5 0.6 0.5 0.4 12.2 11.3 11.5 103.6% Ourgame 6899 HK 2.07 1.4 208 8.7 6.0 5.7 n.a. n.a. n.a. 1.3 1.1 1.0 12.2 13.4 n.a. 123.6% Average 16.7 13.0 10.9 12.4 9.7 8.1 3.9 3.0 2.5 24.5 24.0 24.3 120.9%

Source: Bloomberg, UOB Kay Hian Note: IGG is not included in average calculation.




COMPANY UPDATE HOLD

(Maintained)

Share Price RM2.03

Target Price RM2.29

Upside +12.8%

COMPANY DESCRIPTION MY EG Services provides e-services between the Malaysian government and its citizens and businesses. Services include foreign workers’ work permit renewal, electronic delivery of driver and vehicle registration, licensing and summons services and utility bill payment.

STOCK DATA GICS sector Information Technology

Bloomberg ticker: MYEG MK

Shares issued (m): 3,606.3

Market cap (RMm): 7,320.8

Market cap (US$m): 1,740.1

3-mth avg daily t'over (US$m): 3.4

Price Performance (%) 52-week high/low RM2.30/RM1.43

1mth 3mth 6mth 1yr YTD

1.0 (4.2) 7.4 35.3 34.4

Major Shareholders %

Asia Internet Holdings 29.69

Thean Soon Wong 7.21

JP Morgan Chase & Co. 6.46

FY18 NAV/Share (RM) 0.20

FY18 Net Cash/Share (RM) 0.07

PRICE CHART

80

90

100

110

120

130

140

150

160

1.20

1.40

1.60

1.80

2.00

2.20

2.40

(%)(lcy) MY EG SERVICES BHD MY EG SERVICES BHD/FBMKLCI INDEX

0

20

40

60

80

Sep 16 Nov 16 Jan 17 Mar 17 May 17 Jul 17 Sep 17

Volume (m)

Source: Bloomberg

ANALYST(S)

Vincent Khoo, CFA +603 2147 1998 [email protected]

Malaysia Research Team +603 2147 1988 [email protected]

My E.G. Services (MYEG MK)

Takeaways From Melaka Visit

We recently hosted a site visit to MYEG’s foreign worker accommodation site in Melaka and felt reassured that the set-up and furnishing of the hostel will set a new standard for the country’s foreign worker accommodation needs. Backed by its recent land acquisition in Johor, MYEG is on track to grow the new segment to becoming the largest revenue contributor beyond FY19. Maintain HOLD. Target price: RM2.29. Entry price: RM2.00.

WHAT’S NEW

We hosted a site visit to MYEG’s first accommodation site for foreign workers to have better insight into the group’s latest initiative to further diversify its earnings base. Immigration and road transportation services account for about 65% and 25% respectively of My E.G. Services’ (MYEG) FY17 revenue respectively.

Government to introduce law on proper housing for foreign workers… The Human Resources Ministry had on May 17 announced that it will become mandatory for employers to provide basic minimum standard housing for foreign workers by 2018. The main objectives of these centralised hostels are to: a) provide foreign workers an adequate housing system (ample space, fire safety and other amenities), b) do away with the currently unregulated workers’ quarters, and c) address security and social issues surrounding foreign workers.

…with MYEG filling the gap. Leveraging on MYEG’s success in the foreign worker-related domain, the group could easily tap on it to capture a wider spectrum of foreign worker-related business, namely foreign worker accommodation services. The country currently lacks such a service provider and MYEG is the first mover to capitalise on this new business segment.

Maiden hostel up and running and fully occupied. Responses from fund managers were sanguine given that the guarded accommodation site is fully equipped with the necessary facilities that comply with the basic minimum standard housing for foreign workers (see RHS table overleaf). Such minimum standards are lacking in the country. The maiden site, which consists of two blocks, is currently fully taken up by two factory employers with a total of 1,385 foreign workers. Each housing unit is around 700sf and comes with three bedrooms, one living room, one kitchen, two bathrooms and two toilets.

KEY FINANCIALS Year to 30 Jun (RMm) FY16 FY17 FY18F FY19F FY20F

Net turnover 282 372 584 829 1,025EBITDA 129 183 226 285 353Operating profit 147 203 266 331 406Net profit (rep./act.) 143 202 258 325 401Net profit (adj.) 143 202 258 325 401EPS (sen) 5.9 5.6 7.2 9.0 11.1PE (x) 34.0 36.2 28.2 22.4 18.2P/B (x) 12.1 13.2 9.9 7.6 5.9EV/EBITDA (x) 56.5 39.8 32.2 25.6 20.6Dividend yield (%) 0.9 0.8 1.1 1.3 1.7Net margin (%) 50.7 52.3 44.2 39.2 39.1Net debt/(cash) to equity (%) (25.6) 0.0 (33.7) (46.5) (46.9)Interest cover (x) 37.1 34.9 36.5 71.9 114.2ROE (%) 42.3 40.8 40.1 38.3 36.4Consensus net profit - - 268 342 532UOBKH/Consensus (x) - - 0.96 0.95 0.75Source: My E.G. Service, Bloomberg, UOB Kay Hian




STOCK IMPACT

Blue-sky scenario: New ventures could lift earnings fourfold. We forecast MYEG’s earnings to grow exponentially in five years’ time when the foreign worker accommodation service and GST monitoring programme are fully rolled out. We estimate the two new ventures could lift earnings fourfold in FY22 (refer to RHS charts/table for our interim years’ revenue/assumptions). Details are as follows:

a) Foreign worker accommodation service is expected to bring in >RM650m in annual PBT, based on the long-term target of opening over 500 sites in Peninsular Malaysia.

b) A full roll-out of the targeted 500,000 GST monitoring devices would translate into PBT of RM125m p.a.

Ramping up foreign worker accommodation business... MYEG has two fully-occupied foreign worker accommodation pilot sites in Melaka and is negotiating for the third site. The group has also agreed to lease an 8.9-acre land site from the Johor government for an accommodation site with a bed capacity of about 10,000.

…to eventually form the largest revenue segment in FY19. MYEG is eyeing about 500 sites in aggregate to accommodate about 1m workers. We believe the potential is as huge as RM2b in annual revenue. We assume the accommodation services would bring in PBT of RM32.4m and RM86.4m in FY18 and FY19 respectively. Ultimately, this segment is expected to make up 24.5% and 46.2% of FY18 and FY19 group revenue respectively, forming the largest revenue segment in FY19.

E-government project in the Philippines has taken off. Recall that MYEG had on Mar 17 entered into a JV agreement to develop and implement e-government services projects in the Philippines. Management alluded that the JV corporation has been set up and various concessions have been transferred to the JVC upon incorporation. However, contributions from these services would remain relatively small even though transaction volumes and revenues are growing exponentially with a 40% yoy top-line growth in 2016.

More value to be extracted from immigration segment. Over the years, MYEG has evolved from being a service provider of just the renewal of foreign workers’ work permits to becoming part of the foreign worker amnesty programme. While the foreign worker legalisation programme is expected to expire in Dec 17, we are not ruling out the possibility of MYEG deepening its clout in the immigration segment, in areas such as the hiring of foreign workers. This is further supported by the government’s continuous effort in promoting the digitalisation of services in various sectors. Hiring of new foreign workers is currently being done manually at the government office.

Amnesty programme generates higher average revenue per foreign worker. The amnesty programme generates a higher average revenue of RM165 per foreign worker (RM100 under the renewal programme) based on the mandatory processing fee of RM100 and insurance commission of RM130. This is due to the government’s requirement making it mandatory for illegal workers to take up insurance services upon their legalisation.

EARNINGS REVISION/RISK

No change to our net profit forecasts.

VALUATION/RECOMMENDATION

Maintain HOLD and target price of RM2.29, which implies 0.9x 2018F PEG and 28.4x 2018F PE. Target price could stretch to RM2.55 assuming 1.0x PEG. Entry price is RM2.00.

MYEG’S FIRST ACCOMMODATION SITE

Source: MYEG

REVENUE CAGR OF 26% IN FY17-19

25325426826617545

480383

143

150

60

130

121

112

10396

93

12

12

11

11

0

200

400

600

800

1000

1200

FY15 FY16 FY17 FY18F FY19F FY20F

Others Road Transportation GST Accomodation Foreign Worker

(RMm)

5

Source: MYEG, UOB Kay Hian

PBT AND MARGINS

68

143

201

260

327

403

48

51

54

44

39 39

0

50

100

150

200

250

300

350

400

450

FY15 FY16 FY17 FY18F FY19F FY20F

35

40

45

50

55

60PBT (LHS) PBT Margin (RHS)(RMm) (%)

Source: MYEG, UOB Kay Hian * Margin contraction forecasts relate to rapid growth in the lower margin foreign worker accommodation business.

KEY ASSUMPTIONS Year to 30 Jun FY18F FY19F FY20F Accommodation No. of sites 30 80 100 Rental/worker (RM) 2,400 2,400 2,400 PBT (RMm) 32.4 86.40 129.6 GST monitoring system No. of devices 50,000 60,000 150,000 Fees/device (RM) 1,000 1,000 1,000 PBT (RMm) 12.5 15.0 37.5

Source: MYEG, UOB Kay Hian




PROFIT & LOSS Year to 30 Jun (RMm) FY17 FY18F FY19F FY20F

Net turnover 372 584 829 1,025

EBITDA 183 226 285 353

Deprec. & amort. (20) (40) (46) (53)

EBIT 203 266 331 406

Net interest income/(expense) (5) (6) (4) (3)

Pre-tax profit 201 260 327 403

Tax (1) (1) (2) (2)

Minorities (1) 0 0 0

Net profit 202 258 325 401

Net profit (adj.) 202 258 325 401

BALANCE SHEET Year to 30 Jun (RMm) FY17 FY18F FY19F FY20F

Fixed assets 342 359 413 479

Other LT assets 47 36 36 36

Cash/ST investment 138 323 508 626

Other current assets 336 342 452 539

Total assets 864 1,060 1,408 1,681

ST debt 20 22 21 17

Other current liabilities 172 248 385 394

LT debt 117 55 40 30

Other LT liabilities 2 2 2 3

Shareholders' equity 553 734 961 1,238

Minority interest (1) (1) (1) 0

Total liabilities & equity 864 1,060 1,408 1,681

CASH FLOW Year to 30 Jun (RMm) FY17 FY18F FY19F FY20F

Operating 54 360 398 376

Pre-tax profit 201 260 327 403

Tax (1) (1) (2) (2)

Deprec. & amort. 22 40 46 53

Associates (8) 0 0 0

Working capital changes (163) 61 27 (79)

Other operating cashflows 3 0 0 1

Investing (108) (72) (100) (121)

Capex (growth) (110) (100) (100) (120)

Investments (1) 0 0 0

Proceeds from sale of assets 0 0 0 0

Others 2 28 0 (1)

Financing (18) (93) (113) (136)

Dividend payments (49) (77) (97) (124)

Issue of shares 0 0 0 1

Proceeds from borrowings 50 1 1 1

Loan repayment (20) (17) (17) (15)

Others/interest paid 1 0 0 1

Net cash inflow (outflow) (72) 194 184 119

Beginning cash & cash equivalent 201 129 323 508

Changes due to forex impact 9 0 0 0

Ending cash & cash equivalent 129 323 508 626

KEY METRICS Year to 30 Jun (%) FY17 FY18F FY19F FY20F

Profitability EBITDA margin 59.8 52.4 45.4 44.8 Pre-tax margin 54.2 44.5 39.4 39.3 Net margin 54.2 44.2 39.2 39.1 ROA 23.3 24.4 23.1 23.8 ROE 36.4 35.2 33.8 32.4

Growth

Turnover 32.0 57.1 42.0 23.6 EBITDA 35.3 37.6 23.1 22.0 Pre-tax profit 40.8 29.0 25.7 23.4 Net profit 41.2 28.1 25.8 23.4 Net profit (adj.) 41.2 28.1 25.8 23.4 EPS (5.9) 28.1 25.8 23.4

Leverage

Debt to total capital 15.9 7.2 4.3 2.8 Debt to equity 24.8 10.4 6.3 3.7 Net debt/(cash) to equity (0.0) (33.7) (46.5) (46.9) Interest cover (x) 39.4 42.9 83.5 131.5




SMALL/MID CAP HIGHLIGHTS BUY

(Maintained)

Share Price S$0.62

Target Price S$0.92

Upside +48.4%

(Previous TP S$0.930)

COMPANY DESCRIPTION Banyan Tree Holdings owns and manages hotels. The company also operates spas, galleries and golf courses, and invests in property. Banyan Tree offers design and project management services as well.

STOCK DATA GICS sector Consumer

Bloomberg ticker: BTH SP

Shares issued (m): 761.2

Market cap (S$m): 471.9

Market cap (US$m): 348.3


Price Performance (%) 52-week high/low S$0.660/S$0.360


6.9 21.6 29.2 44.2 29.2


Ho Kwon Ping/ Claire Chiang 38.54

Ho Kwon Cjan 6.52

FY17 NAV/Share (S$) 0.90

FY17 Net Cash/Share (S$) (0.4)

PRICE CHART

70

80

90

100

110

120

130

140

150

160

0.30

0.40

0.50

0.60

0.70

(%)(lcy)BANYAN TREE HOLDINGS LTD

BANYAN TREE HOLDINGS LTD/FSSTI INDEX

0

5

10


Volume (m)

Source: Bloomberg ANALYST(S) Edison Chen +65 6590 6637 [email protected]

Yeo Hai Wei +65 6590 6637 [email protected]

Banyan Tree Holdings (BTH SP)

Key Takeaways From Marketing Trip: Relaxing Beneath The Banyan Tree

The turnaround story for BT remains intact as management shared their optimism for the future and re-iterated their strategy to offload assets, increase revenue and improve margins. Management estimates that BT’s huge beachfront land in Thailand is worth S$5b-6b in developmental value. We incorporate contributions from its China hotel management JV and the dilution effect from the Accor and Vanke deals. Maintain BUY and tweak our SOTP-based target price to S$0.92.

WHAT’S NEW

We hosted the management of Banyan Tree Holdings (BT) at a non-deal roadshow (NDR) recently. This report highlights the key takeaways from the NDR.

STOCK IMPACT

Beachfront land valued at S$5b-6b. According to management’s estimate, the company’s huge beachfront landbank in Thailand holds a GDV of S$5b-6b. The current plan will be to develop it over the next 20 years. There is also a strong pick-up in sales momentum for their existing Thailand properties due to a Russian-led tourism boom following the oil price recovery.

Management optimistic about 2H17 outlook and beyond. Management is optimistic about its outlook, with a special gain to boost its 3Q17 (seasonally weak quarter) performance following the partial divestments of China assets. 4Q17 (a seasonally strong quarter) is also expected to outperform with a pick-up in RevPAR underpinned by tourism growth in Thailand. Moving into 2018 and 2019, management expects 14% CAGR growth organically in terms of hotel management contracts (all signed).

Accor deal set to increase revenue and margins. Our thesis that the Accor deal will not only bring in revenue but also improve margins has been reaffirmed by management. They can now utilise Accor’s strong sales network (with 250 employees in the business development department) to source for new hotel management contracts as well as their local expertise to handle day-to-day operations while BT focuses on high value-add brand management services. Moreover, the partnership could bring in more business for BT’s existing hotels worldwide as customers will be able to book BT hotels through Accor’s website which enjoys a good following.

KEY FINANCIALS Year to 31 Dec (S$m) 2015 2016 2017F 2018F 2019F

Net turnover 371 310 340 356 365 EBITDA 25 22 36 52 57 Operating profit (0) (3) 11 28 34 Net profit (rep./act.) (28) (16) 19 53 14 Net profit (adj.) (34) (46) (20) 5 14 EPS (S cents) (4.5) (6.0) (2.4) 0.6 1.7 PE (x) n.a. n.a. n.a. 112.1 36.9 P/B (x) 0.7 0.7 0.7 0.7 0.7 EV/EBITDA (x) 38.7 44.7 24.1 14.4 12.7 Dividend yield (%) 0.2 - 1.6 1.6 1.6 Net margin (%) (7.4) (5.2) 5.7 15.0 3.9 Net debt/(cash) to equity (%) 70 69 45 29 26 Interest cover (x) 1.1 0.9 1.4 2.2 3.6 ROE (%) (3.9) (2.2) 2.6 6.9 1.9 Consensus net profit - - - - - UOBKH/Consensus (x) - - - - - Source: Bloomberg, UOB Kay Hian




Re-iterating disposal of China hotel assets… Management re-iterated their plan to dispose of all of its China hotel assets to Vanke (50% of the assets have already been disposed with a put option to dispose the other 50% at market price starting May 18) through a hotel assets JV. We estimate total disposal consideration to be in the range of S$180m-200m including divestment of its China fund.

…while retaining control of hotel management JV with right of first refusal. However, BT will retain its 40% ownership of the hotel management JV (with Vanke and JV management expected to hold the other 60%). Management shared that this hotel management JV will have a first right of refusal (ROFR) to manage all the hotels under the abovementioned hotel asset JV. With Vanke potentially injecting capital or assets (Vanke currently has 13 hotels and is in negotiations to take over more brands such as Clubmed) into the business, management opined that they have found a solid strategic partner as Vanke is ambitious and professional.

Lower overheads and greater economies of scale should provide upside potential. Prior to this deal, BT’s China hotel management business has been loss-making even at the EBITDA level due to high overhead costs (its Shanghai HQ alone hires 100+ staff) with just 15 hotels under management. It has also been plagued by issues of doubtful debts with S$10m provided for in the last two years. The strong pipeline of deals from Vanke will allow the JV to achieve economies of scale. Hence, there is significant upside risk to our prior EBITDA and profits forecasts as we did not account for lower losses or the possibility of collecting back the doubtful debts.


Placement proceeds to reduce finance expense. We expect placement of new shares/conversion of debentures to Vanke and Accor totalling 40m shares at a gross consideration of S$48m (S$0.60/share). With the cash inflow, we see less need for management to draw down debt and expect finance expense to decline further to S$15.2m in 2019 (2016: S$29.6m).

Vanke deal is a positive EBITDA contributor to hotel management services. A favourable deal structure which involves BT taking a 30% first cut of hotel management revenue changes the status of its exposure to China where its EBITDA loss-making subsidiary turns into a JV which contributes positively to BT’s EBITDA.

Improvement in operating environment already underway. With RevPAR improvement underpinned by a Russian-led tourism recovery in Thailand, we expect stronger EBITDA contribution derived from organic expansion which is supported by its global partnership with Accor.

Despite execution risks, BT’s strategy of achieving an asset-light model by shedding its China hospitality assets while leveraging on its strategic partners to generate new growth for its hotel management services portfolio resonates well with us.

Raising 2017-19 profits forecasts by 2-64%. We revise our 2017-19 profit forecasts upwards by 2-64% as we account for the positive contributions from its 40%-owned China hotel management JV (assuming three additional hotels p.a. starting from 2018). Our adjusted net profits exclude a one-off disposal gain from China assets to Vanke.


Maintain BUY with SOTP-based target price tweaked to S$0.92, implying 48.4% upside. We incorporate the positive EBITDA contribution from BT’s China hotel management JV and account for the dilution from the Accor and Vanke deals, and tweak our SOTP-based target price to S$0.92. We value BT at S$774.7m, based on 12.9x 2018F EV/EBITDA for its hotel management services (10% discount to peers’ average), and 0.6x of the cap value for its hotel/property development businesses.

VALUATION

Value (S$m)

Per Sh (S$)

Value (S$m)

Business

Hotel/property development 1,184.4 0.6 710.6 Hotel management services business (base on 2018F EBITDA)

29.4 12.9 379.4

6.6% stake in listed Thai associate, Thai Wah 24.4 1.0 24.4

Add: Cash 219.4

Less: Debt (559.2)

Total 774.7 No. of shares (m) Adjusted for new shares issues

841

Value per share (S$) 0.92 Source: UOB Kay Hian




PROFIT & LOSS

BALANCE SHEET Year to 31 Dec (S$m) 2016 2017F 2018F 2019F Year to 31 Dec (S$m) 2016 2017F 2018F 2019F

Net turnover 310 340 356 365 Fixed asset 658 648 638 630

EBITDA 22 36 52 57 Other LT asset 298 296 293 291

Deprec. & amort. 25 24 24 23 Cash/ ST Investment 109 219 191 115

EBIT (3) 11 28 34 Other Current Asset 543 402 297 292

JV/Associate contributions 0 (0) (0) 0 Total Asset 1,608 1,565 1,421 1,328

Net interest income/ (expense) (26) (23) (16) (12) ST Debt 147 145 162 131

Pre-tax profit 1 27 61 22 Other Current Liabilities 134 121 109 109

Tax (8) (8) (8) (8) LT Debt 470 415 252 186

Minorities (9) - - - Other LT Liabilities 125 124 124 124

Net profit (16) 19 53 14 Shareholders' equity 564 591 604 610

Net profit (adj.) (46) (20) 5 14 Minority interest 168 168 168 168

Total liabilities & equity 1,608 1,565 1,421 1,328

CASH FLOW KEY METRICS Year to 31 Dec (S$m) 2016 2017F 2018F 2019F Year to 31 Dec (%) 2016 2017F 2018F 2019F

Operating 23 86 51 58 Profitability Pre-tax profit 1 27 61 22

EBITDA margin 7.1 10.5 14.5 15.6

Tax (9) (8) (8) (8) Pre-tax margin

0.2 8.0 17.2 6.0

Depre. & Amort. 25 24 24 23 Net margin

(5.2) 5.7 15.0 3.9

Share of assoc. (0) 0 0 (0) ROA

(1.0) 1.2 3.6 1.0

Working Capital Changes (6) 55 2 6 ROE

(2.2) 2.6 6.9 1.9

Other Operating CF 13 (13) (29) 15

Growth

Investing (20) 64 94 (13) Turnover (16.5) 9.8 4.8 2.6

Capex (16) (12) (12) (13) EBITDA (10.6) 61.9 45.2 10.2

Dividend Income - - - - Pre-tax profit (103.6) 3,708.0 126.2 (63.9)

Proceeds from sale of assets 0 81 106 - Net profit 41.1 219.6 176.0 (73.1)

Others (4) (5) - - Net profit (adj.) (35.6) 56.9 123.5 204.1

EPS (33.0) 60.6 (123.5) 204.1

Financing (55) (45) (173) (122)

Dividend payments (1) (8) (8) (8) Leverage

Issue of shares - 48 - - Debt to total assets 38.3 35.7 29.2 23.8

Proceeds from borrowings 82 90 - 64 Debt to equity 84.1 73.6 53.7 40.6

Loan repayment (106) (147) (145) (162) Net debt/(cash) to total

assets 31.6 21.7 15.7 15.2

Others/ interest paid (30) (27) (20) (15) Interest cover (x) 0.9 1.4 2.2 3.6

Net cash inflow/ (outflow) (52) 106 (28) (76)

Beginning cash and cash equivalents

165 114 219 191

Changes due to forex impact 0 - - - Ending cash and cash equivalent

114 219 191 115




COMPANY UPDATE BUY

(Maintained)

Share Price Bt193.00

Target Price Bt220.00

Upside +14.0%

COMPANY DESCRIPTION Largest mobile phone operator in Thailand provides digital phone services though the Global Systems for Mobile Communication (GSM) network.

STOCK DATA GICS sector Telecommunication

ServicesBloomberg ticker: ADVANC TB

Shares issued (m): 2,973.1

Market cap (Btm): 576,780.5

Market cap (US$m): 17,425.4


Price Performance (%) 52-week high/low Bt195.00/Bt142.00


6.3 8.1 8.7 19.4 32.0


Shin Corporation 42.5

Singtel Strategic Investment 19.1

NVDR 3.3

FY17 NAV/Share (Bt) 19.61

FY17 Net Debt/Share (Bt) 29.12

PRICE CHART

80

90

100

110

120

130

140

150

160

170

180

190

200

(%)(lcy)ADVANCED INFO SERVICE PCL

ADVANCED INFO SERVICE PCL/SET INDEX

0

10

20

30


Volume (m)

Source: Bloomberg

ANALYST(S)

Chaiwat Arsirawichai +662 659 8301 [email protected]

Advanced Info Service (ADVANC TB)

Earnings Momentum Improving In 2H17

We expect ADVANC to post a higher qoq net profit in 3Q17, supported by lower regulatory costs and easing competition. We expect earnings momentum to continue to improve in 4Q17. We also expect ADVANC to benefit from easing competition and more new spectrums coming up for biddings earlier than expected. Maintain BUY. Target price: Bt220.00.

WHAT’S NEW

We expect Advanced Info Service (ADVANC) to post a net profit of Bt7.6b in 3Q17, up 6.0% qoq and 17.1% yoy. The improvement would mainly be due to lower regulatory cost related to the universal service obligation (USO) fee reduction from Jun 17, while handset subsidy is expected to decline on easing competition and seasonally low handset sales.

STOCK IMPACT

Services revenue to rise 1.3% qoq, boosted by internet data revenue. Although voice revenue could drop 2.0% qoq in 3Q17 on the back of substitution from mobile internet data, non-voice revenue should continue to grow 3% qoq, supported by rising data and smartphone usage, as well as 3G/4G cell site proliferation.

Subscriber base to expand in 3Q17. We expect ADVANC’s subscriber base to expand again in 3Q17 after the negative net adds of 558,000 in 1Q-2Q17 as competition eases. The company is focused on gaining postpaid subscribers.

Handset subsidy losses are expected to decline to Bt111m in 3Q17 from Bt157m in 2Q17. The company is trying to cut back on its handset subsidy programme and is shifting its focus to high-value and high-margin customers. As such, we think handset subsidy costs should be significantly lower than last year’s cost of Bt11b.

Regulatory costs are expected to decrease 19.5% qoq to Bt1.3b on the back of the new USO fee rate of 2.5% (down from 3.75% out-of-service revenue) under the licensing platform from Jun 17. ADVANC’s total operations are running on the licensing platform.

KEY FINANCIALS Year to 31 Dec (Btm) 2015 2016 2017F 2018F 2019F

Net turnover 155,277 152,150 158,742 163,185 168,879EBITDA 70,653 60,899 66,627 70,699 73,663Operating profit 50,157 39,232 41,529 45,164 47,684Net profit (rep./act.) 39,153 30,667 31,892 34,779 36,820Net profit (adj.) 38,924 30,389 31,892 34,779 36,820EPS (Bt) 13.1 10.3 10.8 11.7 12.4PE (x) 14.8 18.9 18.0 16.5 15.6P/B (x) 11.8 13.4 9.9 8.4 7.2EV/EBITDA (x) 9.4 10.9 10.0 9.4 9.0Dividend yield (%) 6.8 5.3 3.9 4.2 4.5Net margin (%) 25.2 20.2 20.1 21.3 21.8Net debt/(cash) to equity (%) 104.8 192.7 148.5 145.2 120.7Interest cover (x) 42.3 15.1 16.6 17.2 17.6ROE (%) 82.1 67.3 63.3 55.0 49.7Consensus net profit - - 29,540 31,949 32,706UOBKH/Consensus (x) - - 1.08 1.09 1.13Source: ADVANC, Bloomberg, UOB Kay Hian




3Q17 RESULTS PREVIEW Year to 31 Dec (Btm) 3Q16 2Q17 3Q17F yoy qoq

% chg % chg Revenue 37,095 39,087 39,204 5.7 0.3 COGS 20,769 22,535 22,106 6.4 -1.9 Handset subsidy -814 -157 -111 n.a. -29.1 SG&A 7,260 6,701 6,742 -7.1 0.6 EBITDA 15,257 17,108 17,718 16.1 3.6 Net income 6,528 7,215 7,646 17.1 6.0 EPS (Bt) 2.21 2.44 2.58 17.1 6.0 SG&A/Sales (%) 19.6 17.1 17.2 EBITDA margin (%) 41.1 43.8 45.2 Net margin (%) 17.6 18.5 19.5 Source: ADVANC, UOB Kay Hian

Higher depreciation expense. The company continues to invest in the 4G network and is expanding its coverage and investment in fibre-to-the-home (FTTH) within the fixed broadband market. We expect depreciation expense to increase to Bt7.4b in 3Q17 from Bt7.2b in 2Q17.

SG&A expenses to be flat qoq in 3Q17. We expect SG&A expenses to be flat qoq (but down 7.1% yoy) as the company continues to improve its network reception and undertakes more marketing campaigns.

We expect earnings to gradually improve in 4Q17 due to the full-quarter benefits from the cut in USO fees from 3Q17 while easing competition will lead to lower handset subsidy and marketing expenses. Thus, earnings should gradually improve in 4Q17.

More balanced allocation of spectrum. We expect the intense competition to ease in the next couple of quarters on a more balanced allocation of spectrums among mobile operators. This is in line with our channel check in a True Corp shop which is now less aggressive than in the past, especially in the prepaid market.

More spectrums up for bidding in 2018. Hence, mobile operators will incur more capex due to additional licence fees, equipment installation costs and operating expenses.


Maintain 2017 earnings forecasts. If ADVANC’s 3Q17 earnings come in in line with our estimate, 9M17 net profit will account for 71% and 76% of our and consensus full-year forecasts respectively. Note that our earnings forecast is 8% higher than consensus forecast. ADVANC’s earnings momentum should remain strong in 4Q17 due to the peak season for the sector, lower regulatory costs and easing competition.


Maintain BUY and target price of Bt220.00. ADVANC still offers a high dividend yield of around 4% and strong operating cash flow. Its timely entry into the 4G and broadband markets allows it to secure customers with high internet data usage.

THAILAND - FREQUENCY SPECTRUM ROADMAP Y e a r / S p e c tru m 2 0 1 8 2 0 2 2 2 0 2 3 2 0 2 5 T o ta l4 5 0 -M H z 2 0 M H z 2 0 M H z7 0 0 -M H z 9 0 M H z 9 0 M H z8 0 0 / 9 0 0 -M H z 2 0 M H z 3 0 M H z 5 0 M H z1 5 0 0 -M H z 9 0 M H z 9 0 M H z1 8 0 0 /1 9 0 0 -M H z 9 0 M H z 4 0 M H z 1 3 0 M H z2 3 0 0 -M H z 6 0 M H z 6 0 M H z2 6 0 0 -M H z 8 0 M H z 8 0 M H z Source: NBTC Spectrum Master Plan No.3

SPECTRUM HELD BY OPERATORS BEFORE TOT’S 2.3GHZ DEAL

Source: Respective companies, UOB Kay Hian

SPECTRUM HELD BY OPERATORS AFTER TOT’S 2.3GHZ DEAL

Source: Respective companies, UOB Kay Hian




PROFIT & LOSS Year to 31 Dec (Btm) 2016 2017F 2018F 2019F

Net turnover 152,150 158,742 163,185 168,879

EBITDA 60,899 66,627 70,699 73,663

Deprec. & amort. 21,667 25,098 25,534 25,979

EBIT 39,232 41,529 45,164 47,684

Total other non-operating income 388 631 643 656

Associate contributions n.a. n.a. n.a. n.a.

Net interest income/(expense) (4,032) (4,015) (4,098) (4,184)

Pre-tax profit 35,865 38,145 41,709 44,157

Tax (5,175) (6,253) (6,930) (7,337)

Minorities (23) 0 0 0

Preferred dividends 0 0 0 0

Net profit 30,667 31,892 34,779 36,820

Net profit (adj.) 30,389 31,892 34,779 36,820

BALANCE SHEET Year to 31 Dec (Btm) 2016 2017F 2018F 2019F

Fixed assets 233,650 253,270 301,313 333,910

Other LT assets 10,121 3,972 4,121 4,279

Cash/ST investment 14,189 18,826 16,679 21,310

Other current assets 17,710 20,076 20,074 20,087

Total assets 275,670 296,144 342,187 379,586

ST debt 0 0 0 0

Other current liabilities 60,128 63,322 64,084 64,951

LT debt 96,473 105,040 116,137 117,299

Other LT liabilities 76,361 74,982 75,826 76,679

Shareholders' equity 42,708 58,060 68,494 79,540

Minority interest 0 129 128 127

Total liabilities & equity 275,670 296,144 342,187 379,586

CASH FLOW Year to 31 Dec (Btm) 2016 2017F 2018F 2019F

Operating 61,635 69,121 72,350 75,031

Pre-tax profit 35,865 38,145 41,709 44,157

Tax (5,175) (6,253) (6,930) (7,337)

Deprec. & amort. 21,667 25,098 25,534 25,979

Associates 0 0 0 0

Working capital changes (1,908) 827 765 854

Non-cash items 11,187 11,299 11,412 11,526

Other operating cashflows 0 4 (140) (148)

Investing (55,102) (42,968) (40,968) (25,450)

Capex (growth) (51,102) (38,968) (36,968) (21,450)

Capex (maintenance) (4,000) (4,000) (4,000) (4,000)

Investments 0 0 0 0

Proceeds from sale of assets 0 0 0 0

Others 0 0 0 0

Financing (6,961) (21,517) (33,529) (44,950)

Dividend payments (36,509) (22,324) (24,345) (25,774)

Issue of shares 0 0 0 0

Proceeds from borrowings 0 0 0 0

Loan repayment 33,455 0 (10,000) (20,000)

Others/interest paid (3,907) 808 816 824

Net cash inflow (outflow) (428) 4,637 (2,147) 4,631

Beginning cash & cash equivalent 14,617 14,189 18,826 16,679

Changes due to forex impact 0 0 0 0

Ending cash & cash equivalent 14,189 18,826 16,679 21,310

KEY METRICS Year to 31 Dec (%) 2016 2017F 2018F 2019F

Profitability EBITDA margin 40.0 42.0 43.3 43.6

Pre-tax margin 23.6 24.0 25.6 26.1

Net margin 20.2 20.1 21.3 21.8

ROA 13.4 11.2 10.9 10.2

ROE 67.3 63.3 55.0 49.7

Growth Turnover (2.0) 4.3 2.8 3.5

EBITDA (13.8) 9.4 6.1 4.2

Pre-tax profit (27.0) 6.4 9.3 5.9

Net profit (21.7) 4.0 9.1 5.9

Net profit (adj.) (21.9) 4.9 9.1 5.9

EPS (21.9) 4.9 9.1 5.9

Leverage Debt to total capital 69.3 64.4 62.9 59.6

Debt to equity 225.9 180.9 169.6 147.5

Net debt/(cash) to equity 192.7 148.5 145.2 120.7

Interest cover (x) 15.1 16.6 17.2 17.6




Disclosures/Disclaimers This report is prepared by UOB Kay Hian Private Limited (“UOBKH”), which is a holder of a capital markets services licence and an exempt financial adviser in Singapore. This report is provided for information only and is not an offer or a solicitation to deal in securities or to enter into any legal relations, nor an advice or a recommendation with respect to such securities. This report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any recipient hereof. Advice should be sought from a financial adviser regarding the suitability of the investment product, taking into account the specific investment objectives, financial situation or particular needs of any person in receipt of the recommendation, before the person makes a commitment to purchase the investment product. This report is confidential. This report may not be published, circulated, reproduced or distributed in whole or in part by any recipient of this report to any other person without the prior written consent of UOBKH. This report is not directed to or intended for distribution to or use by any person or any entity who is a citizen or resident of or located in any locality, state, country or any other jurisdiction as UOBKH may determine in its absolute discretion, where the distribution, publication, availability or use of this report would be contrary to applicable law or would subject UOBKH and its connected persons (as defined in the Financial Advisers Act, Chapter 110 of Singapore) to any registration, licensing or other requirements within such jurisdiction. The information or views in the report (“Information”) has been obtained or derived from sources believed by UOBKH to be reliable. However, UOBKH makes no representation as to the accuracy or completeness of such sources or the Information and UOBKH accepts no liability whatsoever for any loss or damage arising from the use of or reliance on the Information. UOBKH and its connected persons may have issued other reports expressing views different from the Information and all views expressed in all reports of UOBKH and its connected persons are subject to change without notice. UOBKH reserves the right to act upon or use the Information at any time, including before its publication herein. Except as otherwise indicated below, (1) UOBKH, its connected persons and its officers, employees and representatives may, to the extent permitted by law, transact with, perform or provide broking, underwriting, corporate finance-related or other services for or solicit business from, the subject corporation(s) referred to in this report; (2) UOBKH, its connected persons and its officers, employees and representatives may also, to the extent permitted by law, transact with, perform or provide broking or other services for or solicit business from, other persons in respect of dealings in the securities referred to in this report or other investments related thereto; (3) the officers, employees and representatives of UOBKH may also serve on the board of directors or in trustee positions with the subject corporation(s) referred to in this report. (All of the foregoing is hereafter referred to as the “Subject Business”); and (4) UOBKH may otherwise have an interest (including a proprietary interest) in the subject corporation(s) referred to in this report. As of the date of this report, no analyst responsible for any of the content in this report has any proprietary position or material interest in the securities of the corporation(s) which are referred to in the content they respectively author or are otherwise responsible for. IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report was prepared by UOBKH, a company authorized, as noted above, to engage in securities activities in Singapore. UOBKH is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution by UOBKH (whether directly or through its US registered broker dealer affiliate named below) to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). All US persons that receive this document by way of distribution from or which they regard as being from UOBKH by their acceptance thereof represent and agree that they are a major institutional investor and understand the risks involved in executing transactions in securities. Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through UOB Kay Hian (U.S.) Inc (“UOBKHUS”), a registered broker-dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through UOBKH. UOBKHUS accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to and intended to be received by a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of UOBKHUS and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.




Analyst Certification/Regulation AC Each research analyst of UOBKH who produced this report hereby certifies that (1) the views expressed in this report accurately reflect his/her personal views about all of the subject corporation(s) and securities in this report; (2) the report was produced independently by him/her; (3) he/she does not carry out, whether for himself/herself or on behalf of UOBKH or any other person, any of the Subject Business involving any of the subject corporation(s) or securities referred to in this report; and (4) he/she has not received and will not receive any compensation that is directly or indirectly related or linked to the recommendations or views expressed in this report or to any sales, trading, dealing or corporate finance advisory services or transaction in respect of the securities in this report. However, the compensation received by each such research analyst is based upon various factors, including UOBKH’s total revenues, a portion of which are generated from UOBKH’s business of dealing in securities. Reports are distributed in the respective countries by the respective entities and are subject to the additional restrictions listed in the following table. General This report is not intended for distribution, publication to or use by any person or entity who is a citizen or resident of or

located in any country or jurisdiction where the distribution, publication or use of this report would be contrary to applicable law or regulation.

Hong Kong This report is distributed in Hong Kong by UOB Kay Hian (Hong Kong) Limited ("UOBKHHK"), which is regulated by the Securities and Futures Commission of Hong Kong. Neither the analyst(s) preparing this report nor his associate, has trading and financial interest and relevant relationship specified under Para. 16.4 of Code of Conduct in the listed corporation covered in this report. UOBKHHK does not have financial interests and business relationship specified under Para. 16.5 of Code of Conduct with the listed corporation covered in this report. Where the report is distributed in Hong Kong and contains research analyses or reports from a foreign research house, please note: (i) recipients of the analyses or reports are to contact UOBKHHK (and not the relevant foreign research house) in Hong Kong in respect of any matters arising from, or in connection with, the analysis or report; and (ii) to the extent that the analyses or reports are delivered to and intended to be received by any person in Hong Kong who is not a professional investor, or institutional investor, UOBKHHK accepts legal responsibility for the contents of the analyses or reports only to the extent required by law.

Indonesia This report is distributed in Indonesia by PT UOB Kay Hian Sekuritas, which is regulated by Financial Services Authority of Indonesia (OJK). Where the report is distributed in Indonesia and contains research analyses or reports from a foreign research house, please note recipients of the analyses or reports are to contact PT UOBKH (and not the relevant foreign research house) in Indonesia in respect of any matters arising from, or in connection with, the analysis or report.

Malaysia Where the report is distributed in Malaysia and contains research analyses or reports from a foreign research house, the recipients of the analyses or reports are to contact UOBKHM (and not the relevant foreign research house) in Malaysia, at +603-21471988, in respect of any matters arising from, or in connection with, the analysis or report as UOBKHM is the registered person under CMSA to distribute any research analyses in Malaysia.

Singapore This report is distributed in Singapore by UOB Kay Hian Private Limited ("UOBKH"), which is a holder of a capital markets services licence and an exempt financial adviser regulated by the Monetary Authority of Singapore.Where the report is distributed in Singapore and contains research analyses or reports from a foreign research house, please note: (i) recipients of the analyses or reports are to contact UOBKH (and not the relevant foreign research house) in Singapore in respect of any matters arising from, or in connection with, the analysis or report; and (ii) to the extent that the analyses or reports are delivered to and intended to be received by any person in Singapore who is not an accredited investor, expert investor or institutional investor, UOBKH accepts legal responsibility for the contents of the analyses or reports only to the extent required by law.

Thailand This report is distributed in Thailand by UOB Kay Hian Securities (Thailand) Public Company Limited, which is regulated by the Securities and Exchange Commission of Thailand.

United Kingdom

This report is being distributed in the UK by UOB Kay Hian (U.K.) Limited, which is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

United States of America (‘U.S.’)

This report cannot be distributed into the U.S. or to any U.S. person or entity except in compliance with applicable U.S. laws and regulations. It is being distributed in the U.S. by UOB Kay Hian (US) Inc, which accepts responsibility for its contents. Any U.S. person or entity receiving this report and wishing to effect transactions in any securities referred to in the report should contact UOB Kay Hian (US) Inc. directly.

Copyright 2017, UOB Kay Hian Pte Ltd. All rights reserved. http://research.uobkayhian.com RCB Regn. No. 197000447W

Documents

Regional Morning Notes - UTRADE 27 September 2017 Refer to last page for important disclosures. 3 Regional Morning Notes PE BAND - TENCENT PE BAND - NETEASE 5 10 15