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March 28, 2014
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SEE PAGE 15 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 099/03/2012
MediaTek (2454 TT)
More legs to go Raise TP to Street-high of NTD599 (still on 20x FY14 PER) on
3% upward earnings revision for FY14/15F. Maintain BUY.
Expect FDD & TD-LTD 4G chipsets to volume ship in 2Q14. FDD-LTE, used in the developed market, which it has little presence and no market share, will expand MTK’s TAM.
Richer product mix, aggressive cost reduction, operating leverage and rising 3G penetration rate in EM market likely to lead to record earnings in FY14 and FY15.
Raising TP to NTD599 (from NTD555) We raise FY14/15 earnings forecasts by 3% each to reflect higher profit margins, which is the result of richer product mix, aggressive cost reduction as well as operating leverage. Our revised forecasts are now 10% higher than consensus, which continues to play catch. MTK is also likely to deliver record EPS in FY14 & FY15, the highest since 2009 – the peak of the feature phone era!
MTK 4G solution on the way MTK is set to ship 4G chipsets in 2Q14 for international (FDD-LTD) and China standards (TD-LTD). The former is the partnership with TCL Comm, which co-operated with Europe and AP operators for sample verifications, while the latter are used by several of the mainland Chinese vendors. This implies MTK’s 4G solution is “five-mode ready” and compatible for global LTE standard. The integrated LTE chipset (MT6595) will follow closely in 3Q14 and there could be some major breakthrough in new customer wins. Note QCOM dominates in LTE currently with ~100% share of the global integrated 4G market, while MTK has zero presence today. But the landscape is likely to change dramatically a year from now.
The mist about mainland Chinese 4G market We estimate the potential market size of 4G smartphones is 125m units for the three operators collectively in 2014. Domestic vendors may account for 65-70m of these 4G smartphones, which are likely to be 2H14 loaded. The 4G adoption rate could vary depending on subsidy policies, the quality of network and coverage, profitability of handset OEMs and chipset supply etc.
Key Data
Share Price Performance
Maybank vs Market
52w high/low (TWD)
Free float (%)
Issued shares (m)
Market capitalization
Major shareholders:
-LEE CHUI HSING 4%
-TSAI MING KAI 3%
-The Vanguard Group, Inc. 3%
474.50/309.00
1,349
83.1
TWD610.0B
80
90
100
110
120
130
140
150
160
Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14
MediaTek Taiwan TAIEX
1 Mth 3 Mth 12 Mth
Absolute(%) 1.6 3.7 32.0
Relative to index (%) (0.0) 0.8 18.7
Positive Neutral Negative
Market Recs 21 5 3
Maybank Consensus % +/-
Target Price (TWD) 599.00 500.00 19.8
2013 PATMI(TWDm) 27,788 27,493 1.1
2014 PATMI(TWDm) 44,401 40,884 8.6
Source: FactSet; Maybank
Warren Lau(852) [email protected]
Share Price: TWD452.00 MCap (USD): 20.0B Taiwan Target Price: TWD599.00(+33%) ADTV (USD): 93M Technology (Unchanged) BUY
FYE Dec (TWD m) FY11A FY12A FY13E FY14E FY15E Revenue 86,857 99,263 136,047 201,778 235,860 EBITDA 15,074 15,785 29,303 50,145 56,424 Core net profit 13,625 15,717 27,788 44,401 49,735 Core EPS (TWD) 11.87 11.65 20.59 28.55 31.59 Core EPS growth (%) (58.3) (1.9) 76.8 38.6 10.7 Net DPS (TWD) 9.00 9.00 15.31 22.00 26.00 Core P/E (x) 38.1 38.8 21.9 15.8 14.3 P/BV (x) 4.5 3.5 3.3 3.5 3.3 Net dividend yield (%) 2.0 2.0 3.4 4.9 5.8 ROAE (%) 11.9 10.8 15.5 23.0 23.6 ROAA (%) 9.5 8.8 12.5 17.8 18.2 EV/EBITDA (x) 28.1 32.9 17.6 11.6 10.2 Net debt/equity (%) net cash net cash net cash net cash net cash
March 28, 2014 2
MediaTek
A closer look at MTK’s 4G solution As mentioned, MTK is set to ship 4G chipsets in 2Q14 for international (FDD-LTD) and China standards (TD-LTD). The former is through a partnership with TCL Comm [2618.HK, BUY, TP: HKD12], which we believe is ready to ship its One Touch Idol PoP S7 – an international 4G model using MTK’s very first FDD-LTE solution. TCL provided samples of the smartphone to various telecom operators in Europe and Asia in 1Q and it expects the verification process to be completed soon and start shipment in 2Q14. This model uses MTK’s two chips solution – MT6582 and MT6290, where the former is a 3G integrated AP while the latter is a five-mode LTE standalone modem. We believe PoP S7 supports at least 3 or 4 out of the 5 mode connectivity (FDD-LTE, WCDMA, TDS-CDMA and GSM) provided by MT6290. Some investors may have yet to realize MTK’s progress on FDD-LTE.
Other vendors in China may choose to provide 3-mode 4G handsets (TD-LTE, TDS-CDMA and GSM) due to fast turnaround time and cost considerations. The above example implies MTK’s 4G solution is “five-mode ready” and compatible for global LTE standard. China Mobile’s recently revised 4G policy, whereby it stipulates all 4G handsets have to be five-mode compatible to qualify for subsidy, is positive for MTK.
MT6290 supports many of MTK’s existing integrated APs such as MT6592 (oct-core), MT6591 (hexa-core) and MT6588/82 (quad-core), and we expect more models to be released soon in 2Q14 in international and Chinese markets. That said we believe MT6290 is a transitional product and will be replaced by the fully integrated LTE chipsets, first by octa-core MT6595 in 3Q14 and others such as MT6752/32 in 4Q14. We think MT6290 is likely to be discounted in 2015. We expect MTK to ship 10-15m 4G chipsets in 2015, less than 5% of total shipment in 2014. As for 2015, we estimate the 4G shipment to be 100-120m units, representing 25-30% of shipment.
The ability to penetrate the international LTE market is critical for MTK as its presence in the developed market is limited at the moment. Pop S7 is likely to be predominately shipped to Europe where TCL/Alcatel has higher market share and better brand recognition. As such, FDD-LTE will expand MTK’s total addressable market (TAM), not to mention higher ASP and richer mix. This will be one of the major successes of MTK, which is trying to expand its market beyond China. We note QCOM dominates nearly 100% of the global integrated 4G market if we strip out Apple and Samsung, which fully or partially use in-house AP. At present, MTK has zero market share. Other players in the market include Broadcom (BRCM), Marvell (MRVL) and Spreadtrum (SPRD), although we believe the latter has lots of room to catch up in terms of technology and cost. Nevertheless, we believe the 4G market landscape is likely to change dramatically a year from now. We discuss the competition in chipsets in the following section.
Analysis of the competition in 4G chipsets Figure 3 below highlights some of the key integrated LTE chipsets available in the market today or in the next 6-9 months. Clearly, QCOM remains the leader in terms of depth of LTE technology and breath of product offering. Others such as MTK, BRCM and MRVL are closely behind. Among these vendors, BRCM is likely to trail its peers due to the aging design ie Cortex A9, which may result in inferior profitability due to relatively large die size. BRCM could also be penalized by the relatively old and weaker SGX544 GPU. We note BRM’s M320/340 solution was acquired from Renasas Mobile (previously Nokia LTE technology group) in 4Q13. Renasas spent much time and effort in 2012/13 to develop the integrated AP but found
Figure 1: Alcatel Idol Pop S7
Source: Company data, Maybank KE
Figure 2: Global 4G chipset market share
Source: Company data, Maybank KE
QCOM, BRCM, MRVL and MTK battling out in the integrated 4G market
QCOM 60% SEC
13%
AAPL 25%
OTHERS 2%
March 28, 2014 3
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little traction and was forced to shut down the division after it sold the LTE solution to BRCM. We believe MRVL could be in a better position than BRCM as the former adopts the more cost-effective and updated Cortex A7 and Cortex A53 designs. However, one of the draw-backs of MRVL solutions is they require a separate WiFi chipset to complete the entire smartphone solution. This could incur extra cost, which may not be viable for cost-conscious vendors, especially in China. MTK tends to take advantage of the integration-SOC approach to optimize the overall BOM for its customers and as a result gaining competitiveness. The highly integrated MT6752/32 not only utilizes the cost-efficient Cortex A53 engine and the Mali T760 GPU but importantly, they also integrate WiFi functionality into one single chip solution. We believe the cost and performance of MT6752/32 are likely to outpace BRCM/MRVL’s existing solutions, unless they both introduce more advanced features. QCOM’s S410/615 are likely to match MTK’s similar solution, although MTK chipsets offer speedier frequency and probably superior customer services, which is critical for customers in China. Figure 3: Integrated LTE chipset (all are Cat4 LTE) by vendors
MT 6595
MT 6752
MT 6732
S801 8974
S400 8926
S410 8816
S615 8936
BRCM M320
BRCM M340
MRVL 1088
MRVL 1928
# of core 8 8 4 4 4 4 8 2 4 4 4
Cortex A17+A7 A53 A53 Krait400 A7 A53 A53 A9 A9 A7 A53
Arthiciture 32bit 64bit 64bit 32bit 64bit 64bit 32bit 32bit 32bit 32bit 64it
Frequency (Ghz) 1.7-2.5 1.7-2.0 1.5 2.5 1.2 1.2 1.5 1.2 1.5 1.2 1.5
GPU SGX6 Mali-T760 Mail-T760 Adreno330 A305 A306 A405 SGX544 SGX544 GC2000 GC5000
Video UHD, 2K FHD, 1080 HD, 720 UHD, 2K HD, 720p HD, 720 FHD, 1080 HD, 720 HD, 720 HD, 720 FHD, 1080
WiFi Separate Integrated Integrated Integrated Separate Integrated Integrated Integrated Integrated Separate Separate
Camera (MP) 20 16 13 20 13 13 NA NA NA NA NA
Availability Late-3Q14 4Q14 4Q14 Mar-14 4Q13 3Q14 4Q14 Marc-14 Mid-14 Mar-14 Mid-14
Source: Company, Maybank KE
Most of the upcoming 4G handsets in China will be powered by QCOM’s S400 chipset, which was first released in late-2013. While S400 offers five modes global LTE connections, its specifications are generally below par, especially in the graphic. At the same time, it also requires a separate WiFi chipset. MTK’s strategy is to pair MT6592/91/88/82 (all come with integrated WiFi) with MT6290 (standalone modem) with better features - speed and graphic.
We believe MT6595 is likely to be the first integrated LTE chipset available in the market (likely to be in late-3Q14) for MTK, competing with QCOM’s 801/805. MT6595 utilizes the world’s first Cortex A17 and capable to operate at 2.5GHz, backed by the powerful SGX6 GPU for Ultar High Definition display. While it may lack the integrated WiFi, MT6595 should match up well if not ahead of S801 (Galaxy S5 and HTC One M8) in some features. Because of its high-end specifications, we believe MT6595 could upstage some major design wins in 2H14, which could be a major boost for MTK’s reputation as well as share-price catalyst.
MT6595 is also designed with the intention to compete with QCOM’s S805, which offers faster speed (2.7GHz with quad-core Krait450) and more powerful GPU (Adreno 450), which is set to be released in 4Q14 or slightly later. However, we note, S805 is a discrete AP, which comes without LTE
MTK’s 4G solution employs a highly integrated approach to ensure the most competitive BOM
MT6595 – the premium chipset, could score a major customer win in 2H14
March 28, 2014 4
MediaTek
modem and therefore it requires a separate modem for connectivity. The other key new chipset for QCOM in 2014 is likely to be S899 (device name to be confirmed), which is the 64bit architecture targeting high-end smartphones and tablets. S899 should be based on QCOM’s own Krait design rather than the standard core engine from ARM. So far, there is no word on the timing of release but we think it is likely to be in late-2014 or 1H15.
We note being late to LTE may not necessary imply a lower profit margin for MTK. MTK’s business model is based on full turnkey solution which offers reference designs, competitive BOM, technical supports and fast-time-to-market. This strategy remains difficult to replicate, especially when it comes to quality of customer services. Profit margin is also a function of cost management, which includes design optimization (ie choosing the most efficient engine, GPU etc to minimize die size), SOC integration and foundry/back-end solutions. MTK has a proven track record of establishing itself as the key leader during the era of 2G feature phones, 3G smartphones and going forward - 4G smartphones.
Profit margin is a function of quality of customer services and cost management although competition is equally critical
March 28, 2014 5
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3G remains the key in years to come Much has been discussed about MTK’s 4G product portfolio and the competition landscape. However, we believe 3G smartphones remain the key driver for MTK in 2014 and beyond as the penetration rate for global EM-China countries remains low, as shown in Figure 5. QCOM estimates the 3/4G penetration rate for the global EM market was 25% exiting 2013 but it is expected to more than double in the next 3-4 years. As 4G remains almost non-existence for most of the EM countries (only China is rolling out LTE technology in 2014), we believe Figure 5 can be used as a good proxy for global 3G smartphone penetration rate. IDC forecasts the EM market will see the fastest unit growth globally with 21%+ CAGR from 2013-2017, outpacing China of 10-11% and developed markets of 7-8%. In unit terms, the EM is likely to out-number China with 422m units in 2014F and expand rapidly to 700m units by 2017 as consumers continue to upgrade their 2G feature phones to 3G smartphones. Among all the developing countries, India is likely to be the fastest growing due to its massive population and low smartphone penetration rate. IDC expects smartphones in India will grow by more than five-fold to well over 200m units from 2013 of 40m+ units. This will be followed by Latin America of doubling to 168m units, and EMEA-ex WE region of 60-70% to 170m units in the same period. Figure 4: Smartphone sales breakdown by region Figure 5: 3/4G penetration of global EM region
Source: IDC, Maybank KE Source: Qualcomm, Maybank KE
The potential massive size of the untapped smartphone market in the global EM provides a strong driver for MTK. According to MTK, the export market accounted for 15% of its total smartphone shipment in 2013 but is expected to pick up sharply to 30-35% in 2014F and we believe this number is likely to increase over time. We note the “export market” includes the shipments to overseas customers by MTK’s mainland customers as well as MTK’s own international customers such as OEM/ODM handset vendors and telecom operators. The former includes TCL’s international customers, which are growing rapidly, and Lenovo’s and Xiaomi’s effort to increase their overseas shipment etc. The latter consists of overseas OEM customers in India such as Micromax, Karbonn, Lava etc using MTK’s solution for the domestic market. Collectively, they account for 30% of smartphone market share in India. During the peak of the feature-phone era, MTK’s export
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2013 2014F 2015F 2016F 2017F
Developed markets Emerging markets China
3G smartphone penetration expected to double in several years among global EM…
…and volume to grow 21% CAGR 2013-17 and India up five-fold!
MTK’s re-export market will be one of the key drivers
March 28, 2014 6
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market accounted for over 60% of its total feature phone chipset shipment. It is not inconceivable that we see a similar figure for MTK’s smartphone mix in the years to come. Despite the strong growth in 2013, MTK’s market share in the 3G technology remained modest. Within the integrated 3G space, which is the solution used predominantly by mainstream smartphones, MTK increased its market share to 25% in 2013 from 11% in 2012. QCOM continued to dominate the market with 49% market share in 2013, although it declined from 66% in the previous year. We believe QCOM is increasing its focus on the 4G market to sustain its technology leadership and product portfolio rather than the competitive and maturing 3G market. Other noticeable players include Spreadtrum (10% from 7%) and Broadcom (7%, flat YoY). In the overall 3G market, which includes discrete AP and baseband, MTK’s share doubled YoY to 15% while QCOM dipped slightly to 44%. We note competition in smartphones continues to experience consolidation due to intense competition. In 2013, both STE and TI shut down their business and Renasas Mobile was acquired by Broadcom. Figure 6: 3G integrated chipset market share in 2013 Figure 7: Overall 3G market share in 2013
Note: others include STM, Renasas and Marvell Source: IDC, Bloomberg, Maybank KE
Note: others include Apple, Broadcom, Marvell, STM, Renasas, TI etc. Apple, SEC and TI are predominately discrete AP while INTC is standalone baseband. QCOM provided integrated AP, discrete AP and baseband. Source: IDC, Bloomberg, Maybank KE
Some argues that the export market segment could dilute MTK’s profitability owing to lower specifications and ASP. While we think the ASP may be lower than that of chipsets sold to Mainland Chinese OEM customers, we believe the profitability could be similar if not higher depending on design and cost structure. For example, the two lowest ASP chipsets - MT6572 (due-core) and MT6582 (quad-core), among MTK’s increasingly complicated product portfolio, could generate higher profit than some of the mainstream products such as MT6589T. The key is to achieve the balance between customers’ requirement vs the optimization of chipset design to minimize the cost structure (ie smaller die size) and therefore achieve superior profitability. Because of the increasing demand on multimedia features, GPU or graphic processor is becoming a critical part of AP design. For entry smartphones or chipsets, choosing an appropriate GPU technology is critical (ie cost and silicon size) because of limited design budget. Not only is the cost structure of
BRCM 7%
MTK 25%
MRVL 2%
QCOM 49%
SPRD 10%
Others 7%
QCOM 44%
MTK 15%
SEC 8%
INTC 8%
SPRD 5%
Others 20%
MTK’s market share in the integrated 3G chipset increased to 25% in 2013 from 11% in 2012
Some of MTK’s entry products generate higher profit margin!
The key is the optimization of product design – minimizing cost structure
March 28, 2014 7
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MT6572/82 extremely competitive, more importantly, both employ the high SOC integration approach ,which includes WiFi features. This enables MTK’s customers to lower the overall BOM, which includes smaller form factors and lesser components in the handsets. The relentless pursuit to achieve efficiency cost structure is well demonstrated by the rapid introductions of cost-efficient solutions. For example, within a couple months of the introduction of 2013 premium quad-core MT6589, MTK introduced a lower price variant MT6589M. Similarly, the current premium octa-core MT6592 is quickly followed by the more affordable MT6592M, which is likely to be found in the upcoming Xiaomi USD130 Hongmi model while the MT6592 was first used by Alcatel One Touch Idol X Plus for USD350 in late-2013. As MTK rapidly upgrades its product portfolio, its overall ASP is likely to improve over time. This is even true when the mix of the export market increases. For example, quad-core was regarded as a premium product in 2013 but it is now considered as a mainstream chipset. We suspect some of the quad-core APs will be “downgraded” to the entry segment to replace the dual-core chipset in 2015. We believe many re-export markets will simply follow the upgrade trend of its Mainland peers a couple years earlier. As for the premium segment, which is dominated by the octa-core model, it is likely to account for 15-20% of shipment in 2014 vs zero in 2013! Figure 8: MTK – Specifications of 2014 MTK product roadmap for smartphones
Premium Mainstream Entry Modem
MT6592³ MT6595 MT6752¹ MT6732¹ MT6591 MT6588 MT6589T MT6582 MT6572 MT6290²
Core, CPU Octa, A7 Octa, A17+A7 Octa, A53 Quad, A53 Hexa, A7 Quad, A7 Quad, A7 Quad, A7 Dual, A7 -
Speed 2.0GHz 1.7-2.5GHz 1.7-2.0GHz 1.5GHz 1.5GHz 1.7GHz 1.5GHz 1.3GHz 1.2GHz -
Networks W&TD LTE,W&TD LTE,W&TD LTE,W&TD W&TD W&TD W&TD W&TDS W&TDS LTE,W&TD
GPU Mali450 SGX6 Mali-T760 Mali-T760 NA Mali450 SGX544 Mali400 Mali400 -
Video FHD 1080p UHD 4K2K FHD 1080p HD 720p FHD 1080p FHD 1080p FHD 1080p HD 720p HD 720p -
Resolution 1920x1080 2560x1600 1920x1080 1280x1080 1920x1080 1920x1080 1280x1080 1280x720 960x540 -
Camera 163MP 20MP 16MP 13MP NA 13MP 13MP 8MP 8MP -
WiFi Integrated - Integrated Integrated Integrated Integrated - Integrated Integrated -
Tech node 28nm HKMG 28nm HKMG 28HKMG 28HKMG 28HKMG 28nm HKMG 28nm 28nm 28nm 28nm
ASP USD25-30 >USD30 USD25-30 NA NA NA USD15 USD12 <USD10 NA
Availability Late-4Q13 Late-3Q14 4Q14 4Q14 3Q14 2Q14 3Q13 4Q13 3Q13 1H14
1-MT6752//32 are 64bit integrated LTE (Cat 4 -150Mbps), five mode AP. 2-MT6290 is standalone a 3/5 mode Cat4 LTE modem and supports MT6592/91/88/82. MT6592/91/88/82 are pin-count compatible. 3-MT6592 comes with variant version – MT6592M at 1.4GHz and 1.7GHz speed. Source: Company data, Maybank KE
MTK’s blended ASP is likely to rise due to richer mix and feature enhancement
March 28, 2014 8
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The mist about Mainland Chinese 4G market The upgrade to 4G technology in China in 2014 has been the most talked about topic among industry and investment communities. However, we think the market lacks clarity in terms of the potential market opportunity as well as winners/losers. With the recent announcements by China Telecom (CT) and China Unicom (CU), and the recently revised strategy of China Mobile (CM), we attempt to identify the opportunities for reward and risks. CM aims to ship 100m 4G devices in 2014. One should be aware that this figure includes the data cards or tango as well as 4G smartphones. Because of the much lower price and speedier download rate, some consumers may opt for data cards, especially when the 4G service network is rather sporadic. If one assumes the split between tango and smartphones to be 30/70, then, the demand for later is 70m units. Recently, CM required 4G handsets to be five-mode compatible (FDD-LTE, TD-LTD, WCDMA, TDS-CDMA & GSM) in order to qualify for subsidy. As such, we believe international vendors such as Apple, Samsung, Sony, HTC and among others may grab higher market share as they predominantly use QCOM’s chipset solution, which is a five-mode standard. Local vendors that initially work on the three-mode LTE will require extra time for requalification as well as incur higher costs migrating to 5-mode LTE. As such, we estimate the split between international and domestic could be 50/50 (implies 35m units for each group). This compares to the current 30/70 for the existing overall smartphone market. It should be note at the moment, the Chinese government has yet to issue any licence on FDD-LTE, which is an international 4G standard, as opposed to the home-grown TD-LTE technology. CT targets to sell 100m handsets in 2014, including 36m 4G devices. If we assume the similar split between data cards and smartphones, CT could ship 25m 4G smartphones this year. CU launched its 4G service in March and it intends to release four handset models to support its 4G network. CU targets to sell 160m handsets in 2014 but doesn’t provide the breakdown of 4G units. If we assume 40% of the total shipments are 4G and a similar split between tango/smartphones, then the demand for 4G smartphones is 28m units. It should be noted both CU and CT only require 3-mode 4G handsets (although both are lobby being FDD-LTE licence) as such local vendors may stand a better chance for higher market share ie 60% over 40% of international OEMs. To sum up, we forecast the potential 4G smartphone demand in China is approximately 125m units among the three operators in 2014. The domestic vendors may account for 65-70m units or 55%, while the rest will go the international brands. We estimate QCOM will account for an overwhelming share (>70%), followed by Marvell, Broadcom and MTK (<10%). However, as network service improves, technology matures and device price drops, we believe the 4G adoption rate will pick up quickly in 2015 and the chipset market share could change accordingly!
The potential 4G smartphone market size is estimated to be 125m units
CM’s five-mode LTE could favour int’l handset vendors
CT and CU require three-mode LTE may favour local handset OEMs
March 28, 2014 9
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Key financials at a glance With the analysis on products, market share and growth outlook, we note MTK is likely on track to deliver record earnings in FY14 and possibly in FY15 too, making it the most profitable fabless or IC design company globally after QCOM. This is the result of on-going market-share gain, richer product mix, aggressive cost reduction and operating leverage. Normalizing its earnings through fully diluted earnings per share, MTK is still likely to achieve the highest EPS since 2009, which was a record of NTD34.10. Should MTK perform better than our forecast in 2015, there is a reasonable chance for MTK to surpass its 2009 record EPS. We raise our FY14/15 earnings forecasts by 3% each to reflect the above considerations and our revised forecasts are now 10% higher than consensus, which continues to play catch up. That said, we think it is unlikely for MTK to revisit its previous peak margin of 50%+ during the feature phone cycle. However, while the profit margin for the smartphone chipset may be lower (due to higher raw material costs), we stress the amount of profit generated by each unit of smartphone AP is substantially higher than that of feature phones. We estimate the blended ASP for MTK’s smartphone was USD10.25 in 2013 and it’s likely to improve to USD11.25, substantially higher than the feature phone ASP of USD6-7 in 2009. Therefore, even with gross margin of mid-to-high-40% for smartphones, MTK’s profit per unit device is still higher (by more than 50%) compared to the low-to-mid-50% GM during the feature-phone era! Figure 9: MTK’s historic net profit (NTD bn) Figure 10: MTK’s historic EPS in NTD
Source: Company data, Maybank KE Source: Company data, Maybank KE
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MTK’s smartphone AP generates 50%+ higher profit than its feature phones
March 28, 2014 10
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Figure 11: 2014 earning revision vs share price (white) Figure 12: 2015 earnings revision vs share price (white)
Source: Bloomberg, Maybank KE Source: Bloomberg, Maybank KE
Figure 13: MTK (TWD) – 12-month forward PER bands
Source: Bloomberg, Maybank KE
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March 28, 2014 11
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Figure 13 MTK’s earnings model
Assumptions (unit m) 1Q13 2Q13 3Q13 4Q13 1Q14E 2Q14E 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E 2012 2013 2014E 2015E Smartphones 38 52 68 72 72 75 85 92 91 99 104 107 109 231 325 401
Tablets 0 5 10 10 9 11 12 13 12 15 18 19 0 25 45 65
Feature phones 82 99 85 82 74 71 67 64 59 58 58 57 406 348 276 233
DTV 9 10 11 10 22 26 40 38 35 37 44 42 38 40 126 157
Optical storage 23 24 24 24 23 22 22 21 21 21 21 21 103 95 89 84
DVD/BR 10 11 12 12 12 11 11 11 10 10 10 10 49 46 45 41
% to group revenue
Smartphones+tablets 44 54 61 64 62 62 61 65 65 67 66 68 32 57 63 67
Feature phones 20 17 12 11 9 8 7 6 6 5 5 5 29 14 7 5
DTV 7 6 6 5 10 11 15 13 13 13 14 13 7 6 12 13
Optical storage 11 8 7 7 6 5 4 4 4 4 4 3 12 8 5 4
DVD/BR 7 6 5 5 4 4 3 3 3 3 3 2 9 6 4 3
Others 11 9 9 8 9 10 10 9 9 9 9 8 10 9 9 9
TWD/USD 29.4 29.9 29.9 29.6 30.3 30.3 30.4 30.5 30.5 30.5 30.5 30.5 29.5 29.7 30.3 30.5
Smart devices mix analysis (shipment)
Blended ASP (USD) 9.53 10.56 10.20 10.45 11.43 11.21 11.13 11.26 11.20 11.04 11.02 10.97 9.86 10.26 11.25 11.05
Blended GM (%) 43.4% 45.3% 46.0% 48.5% 48.8% 48.1% 47.2% 47.3% 46.6% 46.2% 45.7% 45.5% 42.4% 46.3% 47.8% 46.0%
P&L model (TWD bn) 1Q13 2Q13 3Q13 4Q13 1Q14E* 2Q14E 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E 2012 2013 2014E 2015E
Revenue 23.97 33.28 39.00 39.80 44.83 46.87 53.86 56.22 53.78 57.74 62.08 62.25 99.26 136.05 201.78 235.86
COGS -13.90 -18.89 -21.86 -21.62 -24.06 -25.38 -29.46 -30.67 -29.56 -31.87 -34.48 -34.65 -58.20 -76.27 -109.57 -
130.56 Gross profit 10.07 14.38 17.14 18.19 20.78 21.48 24.40 25.55 24.23 25.87 27.60 27.60 41.06 59.78 92.21 105.30
OPEX -7.00 -8.50 -9.27 -9.78 -10.89 -11.25 -12.76 -13.21 -12.96 -13.74 -14.62 -14.63 -28.64 -34.56 -48.11 -55.95
Operating profit 3.07 5.89 7.86 8.40 9.89 10.23 11.63 12.34 11.26 12.13 12.98 12.97 12.42 25.22 44.09 49.35
Non-op 0.85 1.26 1.17 1.33 1.16 1.14 1.31 1.37 1.36 1.46 1.56 1.57 4.21 4.61 4.99 5.94
Profit befroe tax 3.92 7.14 9.03 9.73 11.05 11.38 12.95 13.71 12.62 13.59 14.55 14.54 16.64 29.83 49.08 55.29
Tax -0.19 -0.41 -0.62 -0.83 -0.91 -1.43 -1.13 -1.20 -1.18 -1.33 -1.49 -1.56 -0.96 -2.04 -4.68 -5.56
Net profit 3.74 6.73 8.42 8.90 10.13 9.95 11.82 12.51 11.44 12.26 13.06 12.98 15.68 27.79 44.40 49.73
FD EPS (TWD) 2.77 4.99 6.24 6.60 6.78 6.33 7.52 7.97 7.28 7.81 8.31 8.27 11.62 20.59 28.60 31.67
Margin (%)
GM 42.0 43.2 43.9 45.7 46.3 45.8 45.3 45.4 45.0 44.8 44.5 44.3 41.4 43.9 45.7 44.6
OPM 12.8 17.7 20.2 21.1 22.1 21.8 21.6 21.9 20.9 21.0 20.9 20.8 12.5 18.5 21.9 20.9
NP 15.6 20.2 21.6 22.4 22.6 21.2 21.9 22.2 21.3 21.2 21.0 20.9 15.8 20.4 22.0 21.1
QoQ chg (%)
Revenue -10 39 17 2 13 5 15 4 -4 7 8 0 - - - -
Gross profit -9 43 19 6 14 3 14 5 -5 7 7 0 - - - -
Operating profit -11 92 34 7 18 4 14 6 -9 8 7 0 - - - -
Net profit -24 80 25 6 14 -2 19 6 -9 7 7 -1 - - - -
EPS -24 80 25 6 3 -7 19 6 -9 7 7 -1 - - - -
YoY chg (%)
Revenue 22 42 32 49 87 41 38 41 20 23 15 11 14 37 48 17
Gross profit 22 50 41 64 106 49 42 41 17 20 13 8 4 46 54 14
Operating profit 58 112 85 142 222 74 48 47 14 19 12 5 1 103 75 12
Net profit 49 101 71 82 171 48 40 40 13 23 10 4 15 77 60 12
EPS 49 101 71 82 145 27 21 21 7 23 10 4 -2 77 39 11
Note: * Merger with MStar from February 2014
Source: Company, Maybank KE
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Income StatementRevenue 86,857 99,263 136,047 201,778 235,860Gross profit 39,344 41,062 59,779 92,206 105,302EBITDA 15,074 15,785 29,303 50,145 56,424Depreciation (2,729) (3,362) (4,081) (6,053) (7,076)Amortisation 0 0 0 0 0EBIT 12,345 12,424 25,222 44,092 49,348Net interest income /(exp) 1,016 1,888 2,623 4,116 4,812Associates & JV 0 0 0 0 0Exceptionals 0 0 0 0 0Other pretax income 852 2,376 1,988 873 1,132Pretax profit 14,213 16,688 29,833 49,081 55,292Income tax (587) (971) (2,045) (4,680) (5,558)Minorities 0 0 0 0 0Reported net profit 13,625 15,717 27,788 44,401 49,735Core net profit 13,625 15,717 27,788 44,401 49,735
Balance SheetCash & Short Term Investments 91,032 89,572 105,663 128,090 147,302Property, Plant & Equip (net) 9,810 10,708 12,306 12,806 13,326Intangible assets 16,151 15,842 15,547 10,200 6,692Investment in Associates & JVs 0 0 0 0 0Other assets 30,748 93,417 102,288 112,219 115,068Total assets 147,741 209,539 235,804 263,314 282,389ST interest bearing debt 4,089 8,880 19,816 19,816 19,816LT interest bearing debt 148 107 70 46 30Other liabilities 27,176 25,482 33,155 40,110 44,499Total Liabilities 31,413 34,469 53,041 59,972 64,345Shareholders Equity 116,278 175,070 182,763 203,346 218,183Minority Interest 50 0 0 0 0Total shareholders equity 116,328 175,070 182,763 203,346 218,183
Cash FlowPretax profit 14,213 16,688 29,833 49,081 55,292Depreciation & amortisation 2,729 3,362 4,081 6,053 7,076Adj net interest (income)/exp (124) (937) (1,540) (470) (566)Change in working capital 379 (7,064) (2,889) (5,619) (1,487)Cash taxes paid 0 0 0 0 0Other operating cash flow 0 0 0 0 0Cash flow from operations 16,707 11,829 25,922 48,449 59,718Capex (2,585) (1,574) (1,599) (1,000) (1,000)Free cash flow 14,123 10,255 24,323 47,449 58,718Dividends paid (21,999) (10,328) (12,150) (20,661) (34,544)Equity raised / (purchased) (2,172) 68 0 0 0Change in Debt 4,255 4,761 10,903 0 0OTH investing/financing cash flow 3,600 (2,603) (2,631) (279) 0Effect of exch rate changes 2,088 (1,759) 3,907 (4,591) (4,591)Net cash flow (106) 394 24,353 21,919 19,583
FYE 31 Dec (TWD m) FY11A FY12A FY13E FY14E FY15E Key Metrics P/E (reported) (x) 38.1 38.8 21.9 15.8 14.3 Core P/E (x) 38.1 38.8 21.9 15.8 14.3 P/BV (x) 4.5 3.5 3.3 3.5 3.3 P/NTA (x) 4.5 3.5 3.3 3.5 3.3 Net dividend yield (%) 2.0 2.0 3.4 4.9 5.8 FCF yield (%) 2.7 1.7 4.0 6.7 8.3 EV/EBITDA (x) 28.1 32.9 17.6 11.6 10.2 EV/EBIT (x) 34.3 41.8 20.4 13.2 11.6
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FYE 31 Dec (TWD m) FY11A FY12A FY13E FY14E FY15EKey RatiosGrowth ratios (%)Revenue growth (23.5) 14.3 37.1 48.3 16.9EBITDA growth (55.7) 4.7 85.6 71.1 12.5EBIT growth (60.3) 0.6 103.0 74.8 11.9Pretax growth (56.0) 17.4 78.8 64.5 12.7Reported net profit growth (56.0) 15.3 76.8 59.8 12.0Core net profit growth (56.0) 15.3 76.8 59.8 12.0
Profitability ratios (%)EBITDA margin 17.4 15.9 21.5 24.9 23.9EBIT margin 14.2 12.5 18.5 21.9 20.9Pretax profit margin 16.4 16.8 21.9 24.3 23.4Payout ratio 75.8 77.3 74.4 77.1 82.3
DuPont analysisNet profit margin (%) 15.7 15.8 20.4 22.0 21.1Revenue/Assets (x) 0.6 0.5 0.6 0.8 0.8Assets/Equity (x) 1.3 1.2 1.3 1.3 1.3ROAE (%) 11.9 10.8 15.5 23.0 23.6ROAA (%) 9.5 8.8 12.5 17.8 18.2
Liquidity & EfficiencyCash conversion cycle 43.9 59.3 61.2 47.9 45.7Days receivable outstanding 38.9 40.1 36.3 33.8 34.9Days inventory outstanding 71.1 71.9 67.1 53.2 51.0Days payables outstanding 66.1 52.8 42.3 39.2 40.2Dividend cover (x) 1.3 1.3 1.3 1.3 1.2Current ratio (x) 3.7 3.8 2.8 3.0 3.2
Leverage & Expense AnalysisAsset/Liability (x) 4.7 6.1 4.4 4.4 4.4Net debt/equity (%) net cash net cash net cash net cash net cashNet interest cover (x) na na na na naDebt/EBITDA (x) 0.3 0.6 0.7 0.4 0.4Capex/revenue (%) 3.0 1.6 1.2 0.5 0.4Net debt/ (net cash) (86,795.5) (80,585.3) (85,776.8) (108,227.7) (127,456.3)
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Research Offices
REGIONAL
WONG Chew Hann, CA Regional Head of Institutional Research (603) 2297 8686 [email protected]
ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 [email protected]
Alexander GARTHOFF Institutional Product Manager (852) 2268 0638 [email protected]
ECONOMICS
Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]
Luz LORENZO Philippines (63) 2 849 8836 [email protected]
Tim LEELAHAPHAN Thailand (662) 658 1420 [email protected]
JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 [email protected]
Josua PARDEDE Economist / Industry Analyst, BII Indonesia (62) 21 29228888 ext 29695 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure
Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs
LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers
CHAI Li Shin (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure
KANG Chun Ee (603) 2297 8675 [email protected] • Consumer
Ivan YAP (603) 2297 8612 [email protected] • Automotive
LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]
Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]
HONG KONG / CHINA
Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional
Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining - Regional
Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer
Karen KWAN (852) 2268 0640 [email protected] • Property & REITs
Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials
Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy
Simon QIAN, CFA (852) 2268 0634 [email protected] • Telecom & Internet
Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials
Warren LAU (852) 2268 0644 [email protected] • Technology – Regional
William YANG (852) 2268 0675 [email protected] • Technology – Regional
INDIA
Jigar SHAH Head of Research (91) 22 6623 2601 [email protected] • Oil & Gas • Automobile • Cement
Anubhav GUPTA (91) 22 6623 2605 [email protected] • Metal & Mining • Capital Goods • Property
Urmil SHAH (91) 22 6623 2606 [email protected] • Technology • Media
SINGAPORE
NG Wee Siang Head of Research (65) 6432 1467 [email protected] • Banking & Finance
Gregory YAP (65) 6432 1450 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos
Wilson LIEW (65) 6432 1454 [email protected] • Property Developers
ONG Kian Lin (65) 6432 1470 [email protected] • S-REITs
James KOH (65) 6432 1431 [email protected] • Consumer - Regional
YEAK Chee Keong, CFA (65) 6432 1460 [email protected] • Offshore & Marine
Derrick HENG (65) 6432 1446 [email protected] • Transport (Land, Shipping & Aviation)
WEI Bin (65) 6432 1455 [email protected] • Commodity • Logistics • S-chips
John CHEONG (65) 6432 1461 [email protected] • Small & Mid Caps • Healthcare
TRUONG Thanh Hang (65) 6432 1451 [email protected] • Small & Mid Caps
INDONESIA
Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy
Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property
Anthony YUNUS (62) 21 2557 1136 [email protected] • Consumer • Poultry
Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement
Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infrastructure • Construction • Transport
Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy
Laura DY-LIACCO (63) 2 849 8840 [email protected] • Utilities • Conglomerates • Telcos
Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement
Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction
Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer / Materials
Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services
Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate
Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector
Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy
Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy
Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem
Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property
Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] • Banking & Finance
Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap
Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics VIETNAM LE Hong Lien, ACCA Head of Institutional Research (84) 844 55 58 88 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities
THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 844 55 58 88 x 8180 [email protected] • Real Estate • Construction • Materials
Le Nguyen Nhat Chuyen (84) 844 55 58 88 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking
NGUYEN Trung Hoa, Dy Head of Retail Research (84) 8 44 555 888 x 8088 [email protected] • Macro • Steel • Real estate
TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction
TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas
PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery
NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage
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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
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 may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
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Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of 28 March 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 28 March 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
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Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194
Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003
London Maybank Kim Eng Securities (London) Ltd 6/F, 20 St. Dunstan’s Hill London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers’ Tel: (44) 20 7626 2828 Fax: (44) 20 7283 6674
New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500
Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136
Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104
Indonesia PT Maybank Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189
India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604
Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738
Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)
Vietnam Maybank Kim Eng Securities Limited 4A-15+16 Floor Vincom Center Dong Khoi, 72 Le Thanh Ton St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 8 38 271 030
Saudi Arabia In association with Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787
South Asia Sales Trading Kevin FOY [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447
North Asia Sales Trading Alex TSUN [email protected] Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635
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