Market Talk Investment Strategy Research Department

Monday, November 21, 2016 Investment Strategy There is no solid factor to boost the Index, while pressure from fund outflow SET Index 1,473.86 has continued, but the impact would be gradually lowering. 1,450 pts could Change (pts) 0.01 be a supportive range. Today’s top pick is GFPT(FV@B19), which would Market Cap (Million B) 49,361.54 benefit from South Korea’s resumption of chicken import from Thailand for the first time in 12 years, which would keep the chicken price high. (0) Fed fund rate hike very likely in December. Markets absorbs this already There would be no new external issue this week. Main focus revolves around the U.S. interest rate hike, which is likely to happen at the last FOMC meeting of this year. Fed Chairwoman Janet Yellen stated late last week that the interest rate hike would happen in the near future. Leading economic indicators have been rebounding; particularly, the inflation Net Buy and Sell by Investor Type (Million B) rate leapt to 1.6%yoy in October from 0.8% in August. This has increased the possibility of Foreign -738.38 the hike in December, from 94% late last week to 98% according to a Bloomberg survey. Proprietary -474.07 Global markets have absorbed the 0.25% hike already, but a correction may happen if the Institutional 253.91 rate is raised by more than 0.25%. Retail 958.55 Thailand's 3Q16 GDP growth is estimated at 3.3%yoy (versus 3.5% in 1H16); the actual figure is reported at 9.30 am. We project GDP growth at 3.6% in 3Q16 and 3.5% in 2016, under growth assumption of 3%yoy for household spending, 3.6% for overall investment (1.5% for private investment and 10% for government investment), 3.8% for government spending, and -1.5% and -2% for export and import (in USD). 2017 GDP is expected to grow around 3.7% mainly thanks to government and private investment, especially the government's 20 mega projects (action plan) worth B1.4tr including the Pink, Yellow, and Orange mass rapid transit Lines and five double-track railways, which are currently in the process of bidding (Requests for Proposal have been sold already). The government will work on another 20 mega projects worth B600bn continuing from this year. Moreover, the Eastern Economic Corridor (EEC) development act has become clearer and would help boost GDP growth closer to the target.

(+) EEC plan shows solid progress, possibly boosting Thai GDP growth above 3.5% Porranee Thongyen License No: 004146 Another plan that would show a solid process in 2017 is the Eastern Economic Corridor (EEC) Therdsak Thaveeteeratham 2017-2021, from which the government expects to draw massive investments from private License No: 004132 companies and overseas companies like in the past. According to the latest details, the Pobchai Phatrawit government would use B712bn investment for a five-year period of project (B1.9tr additional License No: 052647 investment is expected from the private sector). The investment plans are divided into four Paradorn Tiaranapramote License No: 075365 parts as follows. Pasu Chaileecharoen 1. Eleven projects of potential industry development, with total investment of B24bn, by Analyst Assistant giving privilege to projects in three provinces (Chonburi, Rayong, and Chachoengsao) Takit Chardcherdsak Economist Assistant that are ready to support target industries that require high technology (5 new S-curve). English research reports are a rough translation of our Thai-language research products. It is produced The Thai language research reports and information contained therein are compiled from primarily with time efficiency in mind, so that English-English research reports are a rough translation of public data sources and our analysts' interviews with executives of listed companies. our Thai-language research products. It is produced primarily with time efficiency in mind, so that They are presented for informational purposes only and not to be deemed as English-reading clients can see what the main recommendations are from our Thai-language research solicitations to buy or sell any securities. Best attempts have been made to verify team. Given that this is a rough-and-ready translation, Asia Plus Securities Company cannot be held information from these vast sources, but we cannot guarantee their accuracy, adequacy, responsible for translation inaccuracies. completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities. ASIA PLUS SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015 SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015" Market Talk Investment Strategy | Research Department

1.1 Robotics, e.g. robotic arms, which are already used by KCE and IVL. 1.2 Aviation and logistics, e.g. building a logistic hub and providing aircraft maintenance service, as well as developing aviation staff. 1.3 Medical hub, e.g. providing advice via conference call and producing medicine from biotechnology, like in BDMS. 1.4 Biofuel and biochemical, e.g. supporting production of biofuel from agricultural waste. 1.5 Digital, e.g. producing software to control machines and programs used in organizations. 2. A hundred projects of transportation and logistics, with total investment of B600bn, e.g. Motorway 7 (Pattaya - Map Ta Phut), a dual-track rail (Chachoengsao – Khon Kaen), U-Tapao Rayong-Pattaya International Airport, Sattahip Commercial Port, and Laem Chabang Port phase 3. 3. Sixty projects of city plan and utility system, with total investment of B94bn, e.g. city planning, power cable, reservoirs, and healthcare system. 4. Two management projects, with total investment of B131.7m. In 2017, around 120bn of the investment would be put into action. Regarding the source of the investment, the government already has B45bn investment for 45 projects and another B58bn from PPP budget, and it would invest B198bn more in 2018 and the rest in 2019-2021. The progress of the EEC plan would benefit the business sector and private investment. Since Thailand has not had big investment for a long time, this would boost the Thai GDP growth above 3.5% in the long run. (0) Selling pressure weakens although USD makes 13-year high Foreign funds continued to possess a net selling position in Asia of US$255bn (18th day) last Friday; all five countries faced net selling: Taiwan at US$202m (eighth day), the Philippines at US$17m (after one-day net buying), Indonesia at US$10m (eighth day), South Korea at US$5m (after two-day net buying), and Thailand at US$21m or B738m (20th day, totaling B32.6bn). Local institutions bought B254m (after one-day net selling). Foreign net sell started to weaken in the recent few days after continuing since October 26, 2016, totaling US$7.38bn. For the bond market, institutions bought B13.6bn net whereas foreigners still sold B11.3bn (seventh day, totaling B80.5bn). Monthly Foreign Fund Flow in Asia Date Indonesia Philippines S. Korea Taiwan Thailand Total 2016 (ytd) 1,936 383 8,132 10,776 2,546 23,773 January 2016 -165 -43 -2,327 -1,703 -219 -4,457 February 2016 303 -85 -43 1,563 13 1,751 March 2016 178 204 3,128 5,122 749 9,381 April 2016 22 -34 1,826 727 -159 2,382 May 2016 -17 287 85 -2,081 131 -1,595 June 2016 664 312 680 2,617 522 4,796 July 2016 905 418 3,677 5,384 1,266 11,651 August 2016 985 -34 1,062 2,402 988 5,405 September 2016 -279 -354 1,502 473 509 1,851 October 2016 -174 -94 258 -62 -514 -588 November 2016 -515 -274 -1,540 -3,423 -725 -6,477 Unit: Million US$

Market Talk Investment Strategy | Research Department

(0) Don't worry too much about selling pressure YTD accumulated net buy plunged from the peak of B136bn (September 22, 2016) by B46.9bn to B88.8bn at present. Fund outflow is likely to continue for the remainder of this year since USD recently climbed up to the highest level since 2003 as Fed fund rate hike becomes almost certain at the December meeting. Statistically, foreign net selling was likely in November-December. Selling pressure is not likely to be massive from now on though because foreign shareholding is currently low; at the end of October, foreign holdings plus NVDR was as low as 30.23%, much lower than usual. Institutions are not likely to sell as well since there will be LTF and RMF buying as usual one month and a half before the end of year. Overall, there is no need to worry about both foreign and institutional selling and this is a good entry for many fundamentally strong stocks, as follows: 1) Contractor stocks would benefit from the government's investment projects, e.g. mass rapid transit, double-track railways, motorways, and the EEC plans: CK([email protected]), UNIQ(FV@B25), and SYNTEC([email protected]). 2) Food exporters like GFPT(FV@B19) are advisable. South Korea lifted a ban on 12 Thai chicken manufacturers that passed its inspection, boosting price and sales volume. Also, THB has been weakening. 3) 4Q16 growth stocks are recommended. FSMART(FV@B21) would benefit from fierce competition among mobile operators and the price has over 23% upside. WHA([email protected]) and BJC(FV@B64) are likely to show strong earnings growth in 4Q16 as well. 4) Dividend pay are advisable. ASK(FV@B27) has dividend yield as high as 6.8% (paid annually). LH([email protected]) has over 7% dividend yield.

SET vs Sector Return 2015 SET vs Sector Return 2016ytd

STEELS -41.8% MEDIA -12.3% ICT -39.5% TOURISM -7.7% BANK -28.6% INSUR -7.2% AGRI -28.0% CONS -4.4% MEDIA -22.4% CONMAT -4.4% ENERG -20.7% AUTO 0.8% SET -14.0% PROP 1.0% FOOD -11.9% ICT 3.8% AUTO -11.7% HELTH 5.7% PROP -11.0% ETRON 9.2% COMM -8.3% TRANS 10.0% PETRO -1.2% BANK 12.3% CONS 0.4% SET 14.4% INSUR 6.0% STEELS 24.3% CONMAT 8.5% FIN 25.4% TRANS 8.7% AGRI 26.5% ETRON 18.3% FOOD 27.5% TOURISM 18.6% PETRO 29.7% FIN 26.1% ENERG 29.9% HELTH 30.0% COMM 37.0% -60% -40% -20% 0% 20% 40% -20% -10% 0% 10% 20% 30% 40% Source: ASPS Research Source: ASPS Research

Market Talk Investment Strategy | Research Department

Market Talk Top Picks

Start Price Accumulated PER PBV Dividend Stocks Strategist Comment -5 Day Chart Date Fair Value Weight Avg. Last Return 2016F 2016F Yield Safe haven amidst market fluctuation. 2H16 profit and CPNRF 26-Sep-16 12.20 26% 20.25 20.00 -1.24% 15.85 1.60 6.25 dividend likely to rise as CentralPlaza Pinklao is reopened and start generating income. A domestic play with over 51%yoy profit growth expected FSMART 11-Nov-16 21.05 15% 16.70 17.00 1.80% 35.05 11.38 2.76 in 2017 from extension of top up kiosk business to money transfer business. UNIQ would benefit from gradaully appearing govt projects. UNIQ 08-Nov-16 25.00 12% 18.00 17.60 -2.22% 24.01 2.05 2.03 2H16 profit would rise follwing increasing income recognition.

The EEC development project would benefit WHA. Profit WHA 05-Oct-16 4.34 12% 3.20 3.02 -5.63% 8.51 1.84 3.62 would peak in 4Q16 from selling of B13bn assets to REIT.

Fair value is revised up. Eliminating of low-margin goods BJC 28-Oct-16 64.00 10% 52.25 53.50 2.39% 30.78 1.97 0.78 from shelf will boost profit from 3Q16 on.

Government's projects are making progresses. CK has CK 31-Oct-16 37.50 10% 29.25 30.25 3.42% 26.25 2.40 2.15 potential to win Orange, Pink, and Yellow Lines mass rapid transit thanks to its expertise and strong financial position.

Chicken export market would grow continuously 6%yoy GFPT 18-Nov-16 19.00 15% 14.00 14.60 4.29% 12.18 1.72 2.77 and 3%yoy in 2016-2017. South Korea resumed chicken import from Thailand for the first time in 12 years.

Last Friday we reduced investment in CPNRF by 15% and switched to GFPT at the same weight.

Accumulated returns since our recommendation Accumulated contribution returns since beginning of the year

TU, 0.0% KBANK, 0.1% WHA -5.6% RJH, 0.2% BBL, 0.3% RATCH, 0.4% FSMART, 0.4% PS, 0.5% UNIQ -2.2% STPI, 0.5% KCE, 0.6% LPH, 0.7% BDMS, 0.8% S11, 0.8% -1.2% SC, 0.9% CPNRF SCC, 1.0% UNIQ, 1.1% EASTW, 1.2% GFPT, 1.3% SCCC, 1.4% FSMART 1.8% ERW, -0.1% TK, 1.5% TISCO, -0.1% TVO, 1.5% AOT, -0.2% BA, 1.6% TFUND, -0.2% TMT, 1.6% MCOT, -0.3% HANA, 1.6% BJC 2.4% HMPRO, -0.3% AIT, 1.7% KCAR, -0.4% KSL, 1.7% DTAC, -0.4% INTUCH, 1.8% ROBINS, -0.6% ASK, 1.9% SEAFCO, -0.6% IRPC, 2.0% CK 3.4% TCAP, 2.1% PTTEP, -0.6% ADVANC, 2.4% BH, -0.7% PTT, 2.5% WHA, -0.8% CK, 2.7% WORK, -0.8% BLA, -1.2% CPF, 2.7% GFPT 4.3% COM7, 2.9% TASCO, -1.3% SAWAD, 3.7% RS, -1.3% BJC, 3.9% AJD, -2.1% TFG, 6.0% -20% -15% -10% -5% 0% 5% 10% 15% 20% CPNRF, -3.3% MCS, 8.6% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Accumulated returns Accumulated returns since beginning of the year

Portfolio SET Index Portfolio SET Index

60% 60.00% 51.76% 50% 50.00% 40% 40.00% 30% 30.00% 20% 20.00% 14.43% 10% 10.00% 1.57% 0.45% 0.00% 0% 0.00% -10% -1.46% -10.00%

YTD MTD -1D

2-Jul-16

4-Jan-16

4-Mar-16

22-Jul-16

3-May-16

13-Apr-16 10-Oct-16 30-Oct-16

24-Jan-16 12-Jun-16

24-Mar-16

13-Feb-16

11-Aug-16 31-Aug-16 20-Sep-16 23-May-16 Source: ASPS Research

Market Talk Investment Strategy | Research Department