Industry Focus ASEAN Telecom Sector Refer to important disclosures at the end of this report DBS Group Research . Equity 2 Jan 2019 Revisiting EVA for future direction STI : 3,053.43 KLCI: 1692.07 JCI : 6194.50 SET : 1563.88 • Economic Valued Added (EVA) has been more potent than earnings in predicting the share price; our EVA- Analysts based predictions in 2014 have largely materialised Sachin MITTAL+65 66823699
[email protected] • Our top picks are companies where capex has TOH Woo Kim+60 32604 3917 peaked,and sharp EVA improvements are not priced in
[email protected] • Netlink NBN, Singtel and Axiata Group are our top picks in the region Thailand Research Team EVA is more potent than earnings in predicting share price changes over five years.Earnings growth in the short term is STOCKS often achievedby deploying more capital with diminishing 12-mth returns. However, this does not improve EVA due to higher Price Mkt Cap Target Price Performance (%) capital charge and might lead to a drop inearnings in the LCY US$m LCY 3 mth 12 mth Rating NetLink NBN Trust 0.76 2,168 0.87 (2.6) (8.4) BUY medium term due to rising deprecation. Barring the impact of Singtel 2.94 35,147 3.59 (9.3) (18.1) BUY tail-end events, our EVA-based predictions in 2014 have largely Axiata Group 3.97 8,670 5.05 (12.9) (26.2) BUY materialised. We prefer companies whose (i) capex has peaked, and (ii) big EVA improvements are not priced in. Source: DBS Bank, Bloomberg Finance L.P.