September 27, 2018 OUTPERFORM n BTS Group Holdings (BTS TB) Share Price: Bt9.35 Target Price: Bt10.50 (+12.3%) Taking to the skies with BTS sky train . Expect 20% p.a. core profit growth (3-year CAGR) up to FY21F

Initial Coverage led by organic growth, Green Line Extension, Pink and Yellow lines, and strong profit contribution from VGI (+25% p.a.)

CH | CH . Potential upside from High-Speed Rail project to link 3 airports and new concession to manage the entire Green Line after 2029 . OUTPERFORM, Bt10.50 TP; upside risk from new concessions, a growing digital economy, and inorganic growth

Back to growth stage after four years of flat growth BTS, a conglomerate involved in mass transit projects, is a familiar name for investors who ride the Skytrain to CBD during rush hour. BTS’s earnings growth has been flat since FY14 because they had sold net farebox revenue from core network (23.5 km) to BTSGIF in FY14. BTS has 33% stake at BTSGIF. The company also did not find suitable investments to fill the earnings vacuum due to delays in the auction of new mass transit lines. However, BTS has secured 95.7 km of four new COMPANY RESEAR COMPANY Sunthorn THONGTHIP mass transit line projects under both gross-cost and net-cost in the past 662 - 659 7000 ext 5009 two years. These projects will be completed in FY19-21. VGI, a subsidiary [email protected] involved in the media business, targets to grow profit by 33% p.a. (vs our estimate of 25%) to Bt2bn by FY21F led by an expanding BTS mass Key Data transit network and synergies with Rabbit’s and Kerry’s platforms. These 12-mth high/low (Bt) 9.9 / 7.75 factors would support 20% p.a. earnings growth for BTS up to FY21F. Market capital (Btm/US$m) 110,161 / 3,398 Near-term upside from two new projects 3m avg. turnover (Btm/US$m) 230 / 7.1 Free float (%) 58 We see potential upside for BTS if they win the High-Speed Rail project Issued shares (m shares) 11,845 to link 3 airports (Bt224bn) for 50-year PPP net-cost. The High-Speed Major shareholders: Rail will accept bids on 12 Nov and the winner will be announced in -KANJANAPAS KEEREE’ GROUP 41.1 1Q19. BSR JV has experience in government projects, managing BTS -THAI NVDR 7.9 Skytrain network in , and potential that they would partner with -BANGKOK BANK PUBLIC 4.6 PTT. We see high chance that they could secure this project. We see another upside from the possibility that BMA would amend the O&M Share Price Performance contract of the entire green line after 2029 to 30-year PPP net-cost scheme.

OUTPERFORM, Bt10.50 TP; defensive play with potential upside Our TP is based on SoTP valuation. BTS will be a major beneficiary of Bangkok’s rapid urbanization and expanding mass transit network because they operate the core network in Bangkok CBD, and monetization of Rabbit Line Pay as it is a prime candidate to be Thailand’s main digital payment platform. The short-term catalysts would be positive earnings momentum in 3QFY19F and bidding for new concession contracts; the High-Speed Rail in 3QFY19 and the

entire Green Line in 2019. YTD 1Mth 3Mth 12Mth Absolute (%) 12.0 1.6 2.2 8.8 Financial Summary (Btm) Relative to index (%) 12.3 (1.3) (3.1) 3.9 Year to March FY17 FY18 FY19F FY20F FY21F

Sales (Btm) 6,809 12,171 29,399 29,292 36,531 Krungsri Securities vs Market Growth (%) 27.2 78.8 141.6 -0.4 24.7 Positive Neutral Negative EBITDA (Btm) 3,626 4,450 5,936 7,573 9,716 Market Growth (%) 44.2 22.7 33.4 27.6 28.3 Recommend 14 2 0 Recurring profit (Btm) 1,417 2,515 2,541 3,350 4,375 Krungsri Market % +/- Growth (%) (30.0) 77.4 1.1 31.8 30.6 Target Price (Bt) 10.5 10.9 (4.0) Net profit (Btm) 2,003 4,416 2,541 3,350 4,375 ’19 Net Profit (Btm) 2,541 2,698 (5.8) Normalized EPS (Bt) 0.12 0.21 0.21 0.28 0.37 ’20 Net Profit (Btm) 3,350 3,471 (3.5)

Growth (%) (30.1) 77.4 1.0 31.8 30.6 Normalized PE (x) 62.2 36.3 43.6 33.1 25.3 Krungsri's earnings revision DPS (Bt) 0.34 0.35 0.17 0.24 0.30 2019F 2020F Yield (%) 4.6% 4.5% 1.8% 2.5% 3.2% Earnings revision (%) - - BVPS (Bt) 3.6 3.4 3.5 3.5 3.6 Source: Bloomberg, Krungsri Securities P/BV (x) 2.09 2.25 2.69 2.66 2.60 Disclaimer: This publication constitutes information disclosed to the public and believed to be reliable but its accuracy and completeness are not guaranteed. All opinions, suggestions, or projections are for informational purposes only and shall not be construed as an inducement for the sale or purchase of securities. Amendments to this publication may be made without prior notice. Investors are urged to exercise caution in making a decision to invest in any securities. 1

Initial Coverage | BTS September 27, 2018

Business

BTS Group Holdings PCL (BTS) is the first provider of mass-transit services in Thailand. It is a privately-owned conglomerate. The company is also involved in complementary businesses - Media, Property and Services. Revenue from Mass Transit and Media accounted for 65% and 28% of FY18 revenue, respectively, while both businesses contributed almost 100% of operating EBITDA in FY18.

FY18 Operating revenue breakdown FY18 Operating EBITDA breakdown

Source: Company data Source: Company data

BTS operates the mass transit business through majority-owned subsidiary, Bangkok Mass Transit System Public Co., Ltd. (BTSC). BTSC is currently the exclusive concessionaire and operator of the Green Line, Bus system, and future operator and majority-JV partner for the Pink and Yellow lines. BTS is involved in the Media business through majority-owned subsidiary, VGI Global Media PCL (VGI). VGI is the leading Out-of-Home Media company in Thailand. It is also expanding into payment-based data platform, the “Rabbit” ecosystem, to earn payment and advertising income from Rabbit Line Pay users. BTS also dabbles in the property business through its 39% stake in U City.

BTS: Business organization and shareholding structure

Source: Company data (as of 31 March 2018)

Krungsri Securities Research 2

Initial Coverage | BTS September 27, 2018

Mass Transit business

BTSC is the exclusive concessionaire and operator of the BTS Skytrain core network (23 stations, 23.5 km) located in Bangkok CBD under a 30-year net cost model from 1999 to 2029. In April 2013, BTSC sold the rights to net farebox revenue of the core network up to Dec 2029 to BTSGIF for Bt62.5bn. BTS used the proceeds to invest in 1/3 of units in BTSGIF (10-year moratorium) and booked Bt950m share of net profit from BTSGIF in FY18.

Core network ridership and farebox revenue outlook Share of net profit from BTSGIF

Source: Company data Source: Company data

BTSC has been operating and maintaining the Green Line Extension Phase I (11 stations, 12.8 km) since 2009 for a pre-agreed fee income (zero ridership risk). The company also signed a 30-year O&M contract in May 2012 to operate and maintain the Phase I Extension and the core network after it expires in 2029. BTS booked Bt1.9bn O&M revenue in FY17/18.

BTS’s network coverage will expand by 3.5 times (38.1km currently) to 132 km by FY22. These comprise 26-year O&M contracts for the Northern and Southern Green Line extensions (from Bearing to Samut Prakarn and from Mo Chit to Khu Khot, total 25 stations, 30.8 km) in March 2017. The company also secured the (30 stations, 34.5 km) and the (23 stations, 30.4 km) in June 2017 under 30-year PPP net-cost concession contracts.

BTS’s network will expand 3.5x from 38.1 km in FY18 to 132 km in FY22

Source: Company data

Krungsri Securities Research 3

Initial Coverage | BTS September 27, 2018

Media business

BTS is involved in the Media business through majority-owned subsidiary, VGI Global Media PCL (VGI). VGI is the leading Out-of-Home Media company in Thailand. They have an exclusive concession to manage advertising space in the core BTS stations. VGI has expanded to include broad touchpoints across the Out- of-Home (OOH) Media segment, such as managing advertising space in key offices and commercial buildings in Bangkok, on street furniture, outdoor billboards, aviation and activation media.

VGI: OOH media and digital service businesses

Source: Company data

VGI is also involved in the online business through a payment-based data platform called the Rabbit ecosystem. Rabbit was developed from an offline transit card (Rabbit Card) into an e-wallet, including Rabbit LinePay online payment channel within the LINE messaging app. Both payment channels are being rapidly adopted by an expanding base of brick-and-mortar and online vendors, enabling VGI to offer omni-channel and Offline-to-Online (O2O) solutions to give their customers more measurable and targeted advertising capabilities.

Out of Bt3.9bn total revenue in FY18 (+30% yoy), 58% is from BTS-related media, 25% from outdoor media, 8% from office building media, and 9% from digital services media.

VGI targets to be One-Stop Solution shop for customers VGI: Operating revenue breakdown

Source: Company data Source: Company data

Krungsri Securities Research 4

Initial Coverage | BTS September 27, 2018

Why we like BTS

We initiate coverage of BTS with an OUTPERFORM rating and SOTP TP of Bt10.50/sh. We like BTS for the following reasons:

1) New MRT lines to boost ridership on BTS’s core network The MRT network is still immature at 110.8 km vs the targeted 515.2 km by 2029 under the masterplan. Currently, BTS operates the core network – the 38.1km Green Line with a weekday ridership of 743,223 trips/day. This accounts for 62% of total average weekday ridership on all MRT lines (1.2m trips/day). We expect ridership on the existing Green Line to grow by 8% p.a. CAGR over FY18-23F (5- year) to 1m trips/day premised on the MRT network expanding by at least 30% p.a. CAGR to 400 km by 2023. Our ridership growth assumption is conservative as penetration in Bangkok’s MRT network is only 5% vs 13%-47% for mass transit ridership in other major cities worldwide. We estimate share of profit from BTSGIF will grow by 12% p.a. (5-year CAGR over FY18-23F) to Bt1.7bn by FY23F.

Bangkok: Operating lines (110.8 km; 78 stations) Rail mass transit master plan (515km by 2029E), 23.8% share of Mass Transit commute by 2037 (5.4m trips/day)

Source: Company data Source: Ministry of Transport

Thailand: Government target for Rail mass transit Metro data in major cities (ranked by ridership/day)

Source: Company data Source: World Metro Database, Wikipedia, UN, and Krungsri

Krungsri Securities Research 5

Initial Coverage | BTS September 27, 2018

2) BTS network will expand 3.5x from 38 km in FY18 to 135 km by FY22 COD for the Southern Green Line Extension (12.6 km) is scheduled for this December, Northern Green Line Extension (18.2 km) in July 2020, and Phase 1 (1.7 km) in September 2020. These projects are under O&M contracts, where BTS receives fees from the BMA to provide O&M services until May 2042 for the Green line Extension and Sep 2050 for the Gold line. . We estimate BTS’s O&M revenue would grow 40% p.a. (3-year CAGR over FY18-21F) to Bt5bn by FY21F led by these new lines.

Timeline for new lines and CAPEX

Source: Company data

The BSR JV (BTS holds 75% stake) won the Bt100bn deal to build and operate two monorail projects (Pink and Yellow lines) under 30-year PPP net-cost concessions. The 34.5 km Pink Line will run from Kae Rai to , while the 30.4 km Yellow Line will run from Lad Phrao to Sam Rong district. Civil works for both lines would be subsidized by the government, up to Bt22.5bn for the Pink Line and Bt25.1bn for the Yellow Line. Funding will be divided into equal payments over 10 years from the start of operation in October 2021. We estimate ridership would average 180-200K trips/day (near BTS’s target) for each line in the first year. This is higher than street forecast of 100K-150K trips/day, as both lines will pass through major residential areas, government complexes, malls, and exhibition centers (i.e. Impact, Muang Thong Thani). To meet ridership at this level, BTS has ordered 72 mono rails (4-car train) to service the lines. If ridership growth on both lines is in line with projection at 4-5% p.a., BTS will order additional rails during Year 11-13.

Krungsri Securities Research 6

Initial Coverage | BTS September 27, 2018

Pink and Yellow monorail lines (64.9 km)

Source: Company data

3) Near-term upside from new projects The Thai government plans to accept bids for the High-Speed Rail (220 km), Southern (23.6 km), and (39.6 km) in 4Q18-2Q19. BTS is interested to bid for the High-Speed Rail and Orange Line, and we believe they would win at least one of these.

BTS will focus on new 6 lines in the next 5 years (301.2 km)

Source: Company data

Krungsri Securities Research 7

Initial Coverage | BTS September 27, 2018

3.1 High-Speed Rail: This will connect Thailand’s three major airports (Don Muang – Suvarnabhumi – U-Tapao) and is expected to open for bidding in November. The project value is Bt224bn, comprising Bt168bn for the railway system (Don Muang, Suvarnabhumi and U-Tapao Airports), Bt45bn for property development (at Makkasan Airport Link and Sri Racha high-speed train areas), and Bt10.7bn for the Airport Rail Link. The government will subsidize up to Bt120bn (50% of the project) for civil works and funding will be divided into 10 equal annual payments from the start of operation. So far, 31 private entities have bought bid documents (TOR) for the high-speed train project, but we expect only 5-6 to submit bids on 12 November because of a Bt2bn deposit requirement. The bidders should have experience managing government construction projects, operating and maintaining mass transit networks, and developing property projects in Thailand. The winner has to turn around the Airport Rail Link project (currently running at Bt300m loss p.a.), develop rail links between the three airports, and maximize value of development land around the Makkasan Airport Link area (150 rai) and Sri Racha High Speed Train area (25 rai). The latter project is important to offset losses at the High-Speed Rail business in the first 10 years given ridership assumption of 100K trips/day in the first year compared to 130-150K tourists/day at Don Mueang and Suvarnabhumi airports. The BSR JV (BTS holds 75% stakes) could win the project because of their experience in government projects and managing the BTS Skytrain network in Thailand. Their chance of winning would increase if they partner with PTT to bid for the project.

High-Speed Rail project Total construction cost for High-Speed Rail project

Source: BTS Source: www.eeco.or.th

3.2 Orange Line: The MRTA governor expects to issue TOR for the Orange Line (Bt140bn) by 1Q19. This will comprise Bt96bn for civil works for Orange Line (West) and Bt40bn for the M&E system. The concession is similar to those for the Pink & Yellow lines, where the bidders build and operate the projects under 30-year PPP net-cost concession contracts. The winner would be the one who bids for the least subsidy from the government. We expect the auction to be held in 2Q-3Q next year. However, we see low chance of BTS winning this project because BEM has a cost advantage as they are the current operator of the , which crosses the Orange Line at Thailand Cultural Center.

Krungsri Securities Research 8

Initial Coverage | BTS September 27, 2018

3.3 Entire Green Line: There is potential upside for BTS if they win the concession to manage the entire Green Line under net-cost scheme (revenue-sharing structure). According to Prachachat (10 Aug), the BMA plans to propose to the Ministry of Interior to farm out the management of the entire Green Line under a public-private partnership (PPP) scheme. The BMA will hold talks with related private enterprises before drafting the TOR within 60 days. If everything pans out as planned, they expect to announce the winning bidder in 2Q19. Our channel checks reveal the entire Green Line contract would be under the PPP net-cost scheme with a 30-year concession (2030-2059). The contract will start after BTS’s concession for the core network expires in 2029. The winner will share BMA’s financial burden (Bt127bn) including borrowings, financial costs, and future investments.

There are at least two reasons why BTS might win this project.

First, BTS is the current operator of the Green Line. They also have an O&M contract for the entire Green Line up to 2042. In addition, BTS own 52 trains (with 46 trains on order for a total of 98 trains) that are currently serving the Green Line. Hence, BMA would have to pay a huge compensation to BTS if they award the concession to another operator.

Second, the BMA wants to cap fares for the Green Line at Bt65/trip vs Bt158/trip when the entire Green Line is in operation by 2020. The current fare is Bt15-43/trip for the core system (Mo Chit-On Nut and National Stadium-Saphan Taksin) and BTS has a concession to collect farebox revenue until 2029. The fare for the first extension (Saphan Taksin - Bangwa and On Nut-Bearing) is currently Bt15/trip (all- in package), set by the BMA. Under the MRTA roadmap, the fare for the second extension (Bearing-Samut Prakan and Mo Chit-Saphanmai-Khu Khot) would be Bt4/station and up to Bt100/trip given 25 stations under the second extension. To control the fare, the BMA may have to follow the Blue Line Extension scheme, by negotiating with the current operator to control fares and share the free cash flow when the project EIRR hits an agreed threshold. This would be a win-win solution for the BMA and BTS.

Projected ridership on the Green Line core network Investment for entire Green Line under BMA concession (2019-2059)

Bt m

Financial cost 7,356 Civil works 75,190 E&M works & train procurement 11,000 Other CAPEX (i.e. debottleneck 2,000 Saphan Taksin station) Other OPEX 2,500-7,500 Total 127,000

Source: Company data, Krungsri securities Source: Prachachat

Krungsri Securities Research 9

Initial Coverage | BTS September 27, 2018

4) Expect solid 20% earnings growth (3-year CAGR) over FY18-FY21F This should be supported by organic growth, Green Line Extension, Pink and Yellow lines, and strong profit contribution from VGI (+25% p.a.).

We expect share of profit from BTSGIF to grow by 15% p.a. (3-year CAGR over FY18-21F) to Bt1.4bn in FY21F. O&M revenue would grow 40% p.a. over the same period to Bt5bn supported by COD for the Southern Green Line Extension (12.6 km) this December, Northern Green Line Extension (18.2 km) in July 2020, and Gold Line Phase 1 (1.7 km) in September 2020. Assuming 15% NPM, the O&M business would contribute Bt750m profit to BTS in FY21F. Note that BTS also earns Bt500-Bt1bn profit annually (derived from services and net interest income) by providing E&M works & train procurement services for Green Line Extension Phase II and civil works for the Pink and Yellow lines.

For VGI (BTS holds 72% stake), we estimate earnings will grow by 25% p.a. (3- year CAGR over FY18-21F) to Bt1.6bn in FY21F. This would be driven by 20-25% p.a. increase in revenue supported by an expanding BTS mass transit network, increasing supply of office space, and new licensing agreements for their expanding street billboard portfolio. There should be synergies with Rabbit and Kerry platforms. VGI expects revenue contribution from digital media services, payment platform, and synergies with Rabbit Line Pay and Kerry to increase from 10% of total revenue in FY18 to 40% in FY21F.

U City (BTS holds 39% stake) is involved in the property business. We expect U City could turn around in FY19F after Bt500m loss contribution in FY18 led by larger share of profit from the transfer of condominium units worth Bt8-10bn (vs Bt25bn current backlog) through the 50:50 JV with Sansiri. The company is targeting Bt1.4bn net profit in FY22.

Expect 45% revenue CAGR over FY18-21F Expect 20% core earnings CAGR over FY18-21F

Source: Company data, Krungsri Securities Source: Company data, Krungsri Securities

Krungsri Securities Research 10

Initial Coverage | BTS September 27, 2018

Valuation

OUTPERFORM, TP Bt10.50/sh

Our TP is based on DCF valuation (6% WACC, 0.6 beta) and implies 37x FY19F PE. The stock offers 2.0% dividend yield (FY19F). We spot BTS as a defensive play given low 0.6x beta and high earnings visibility, and their core operation is resilient to an economic downturn. BTS will be a major beneficiary of rapid urbanization in Bangkok and the expanding MRT network. BTS currently operates the core network in Bangkok CBD, and rising ridership on the MRT network would contribute significantly to the BTS Skytrain core network. In addition, VGI could monetize Rabbit Line Pay because it is the prime candidate to be the main digital payment platform in Thailand. Short-term catalysts would be positive earnings momentum in 3QFY19 and bidding for new concession contracts - High-Speed Rail in 3QFY19 and Green Line in FY19.

BTS: Valuation Current valuation Bt mn Bt/sh Rail business BTSGIF 23,439 1.98 O&M contracts 40,538 3.42 Pink Line 7,062 0.60 Yellow Line 14,862 1.25 Total Rail business 85,901 7.25

Investment Cash and Liquid Investment 15,409 1.30 VGI 35,842 3.03 U City 4,283 0.36 Other investments 32,415 2.74 Total investments 87,949 7.42

Interest -bearing debt 49,480 4.18

Total 124,370 10.50

BTS: Potential upside Probability of success Bt mn Bt/sh Rail business Western Green Line (O&M) 80% 3,356 0.28 LRT (O&M) 80% 9,484 0.80 Grey Line Phase I (O&M) 80% n.a. n.a. High Speed Rail 50% n.a. n.a. Entire Green Line 90% n.a. n.a. Orange East and West lines 40% n.a. n.a. Others BTS’s Infrastructure Funds Phase II 70% n.a. n.a. Source: Company data, Krungsri Securities

Krungsri Securities Research 11

Initial Coverage | BTS September 27, 2018

P/E Band P/BV Band

Source: Bloomberg, Krungsri Securities Source: Bloomberg, Krungsri Securities

Peer comparison Div Market PE P/BV EPS Growth Yield ROE Share Price Cap (x) (x) (x) (%) (%) Performance BB Ticker Name US$m 18F 19F 18F 19F 18F 19F 18F 18F 1M 3M 6M YTD Toll Road Business BTS TB BTS GROUP HOLDINGS PCL 3,413 43.6 33.1 2.7 2.7 1.0 31.8 1.8 5.4 1.6 2.2 12.0 12.0 737 HK HOPEWELL HIGHWAY INFRASTRUCT 1,637 17.4 17.0 2.5 2.5 (1.4) 2.4 5.8 11.8 (10.5) (13.2) (12.8) (16.7) 576 HK ZHEJIANG EXPRESSWAY CO-H 3,575 7.4 7.0 1.2 1.2 0.9 5.2 6.9 15.4 4.6 (7.5) (21.9) (25.1) 548 HK SHENZHEN EXPRESSWAY CO-H 2,471 8.0 7.4 1.1 1.1 0.9 8.4 5.8 12.8 2.1 (1.4) (2.1) (3.8) 107 HK SICHUAN EXPRESSWAY CO-H 1,377 7.1 6.7 0.5 0.5 2.1 6.7 4.7 7.7 0.8 (1.2) (13.2) (14.7) 995 HK ANHUI EXPRESSWAY CO LTD-H 1,269 6.2 6.2 0.8 0.7 1.4 0.7 5.6 11.4 8.4 (1.9) (20.5) (26.8) LTK MK LINGKARAN TRANS KOTA HLDGS 588 9.7 9.5 N/A N/A N/A 1.3 5.8 25.8 (10.0) 6.5 (17.7) (16.9) Average (simple) 14.2 12.4 1.5 1.4 0.8 8.1 5.2 12.9 Rail Business BEM TB BANGKOK EXPRESSWAY & METRO P 4,098 39.9 30.5 4.0 3.8 5.5 30.8 1.6 10.9 5.5 16.0 19.2 13.0 66 HK MTR CORP 31,842 23.3 21.3 1.4 1.4 0.7 9.2 2.8 6.5 2.1 (6.0) (5.0) (11.0) Average (simple) 31.6 25.9 2.7 2.6 3.1 20.0 2.2 8.7

Source: Company data, Bloomberg, Krungsri securities

BTS: Quarterly Earnings Unit: (Btm) 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 Revenue 2,680 2,185 4,532 2,773 2,629 Expenses 1,782 1,258 3,343 1,702 1,565 Gross profit 898 927 1,190 1,071 1,064 SG&A 453 585 617 626 841 Operating profit 445 342 573 445 223 Other income 464 497 508 484 587 Other expense - - - 247 - Equity income 99 84 193 (196) 111 Extra item 305 230 2,690 - EBIT (108) 900 1,229 1,504 3,176 921 Interest expense 294 318 313 311 315 EBT 606 910 1,191 2,866 606 Income tax 168 169 218 221 111 Minority interests 33 89 85 175 108 Net profit 405 653 889 2,469 387 EPS (THB) 0.03 0.06 0.08 0.21 0.03 Extra item 13 182 (42) 1,834 (85) Tax reversal - - - - - Recurring profit (Btm) 392 471 931 635 472 Normalized EPS (Bt) 0.03 0.04 0.08 0.05 0.04 Source: Company data, Bloomberg, Krungsri Securities

Krungsri Securities Research 12

Initial Coverage | BTS September 27, 2018

INCOME STATEMENT (Btm) FY17 FY18 FY19F FY20F FY21F Turnover 6,809 12,171 29,399 29,292 36,531 Expenses (4,395) (8,843) (24,805) (23,794) (29,548) Depreciation & amortization 577 758 774 789 805 Gross profit 2,991 4,086 5,368 6,287 7,788 S&A expenses (1,817) (2,281) (2,880) (3,599) (4,518) EBIT 1,174 1,805 2,488 2,688 3,270 Interest expense (644) (1,236) (1,461) (2,020) (2,807) Other income 1,293 1,954 2,390 3,354 4,521 Other expense (51) (247) (254) (262) (270) Pre-tax profit 1,772 2,276 3,162 3,760 4,713 Income tax on company & subsidiaries (646) (776) (740) (953) (1,221) Profit after tax 1,126 1,500 2,422 2,807 3,493 Minority interests (244) (381) (419) (461) (507) Share of associate net income 632 180 539 1,004 1,390 Preferred dividends 0 0 0 0 0 Recurring attributable net profit 1,514 1,298 2,541 3,350 4,375 Extraordinary items 489 3,117 0 0 0 Reported net profit 2,003 4,416 2,541 3,350 4,375

Shares in issue (Y/E, m) 11,841 11,844 11,845 11,845 11,845 Shares in issue (weighted avg, m) 11,841 11,844 11,845 11,845 11,845 EPS (before extraordinary items, Bt) 0.12 0.21 0.21 0.28 0.37 DPS (Bt) 0.34 0.35 0.17 0.24 0.30 DPS/EPS (%) 201 94 80 84 80

CASH FLOW (Btm) FY17 FY18 FY19F FY20F FY21F Cash flows from operations before WC 821 5,166 3,315 4,139 5,180 Net change in working capital (3,097) (7,719) 914 5,221 234 Cash flow from Operations (2,276) (2,553) 4,229 9,360 5,414 Capex (10,152) (2,352) (12) (95) (171) Other (1,505) (6,758) (21,121) (19,124) (23,882) Cash flow from Investment (11,657) (9,109) (21,133) (19,219) (24,053) Net borrowings 28,428 9,458 11,931 16,460 21,643 Equity capital raised 42 41 0 0 0 Others 2,198 617 (22) (21) (19) Dividends paid (4,026) (4,145) (2,033) (2,814) (3,500) Cashflow from financing 26,642 5,971 9,876 13,625 18,124 Net change in cash 12,708 (5,691) (7,027) 3,767 (516)

Krungsri Securities Research 13

Initial Coverage | BTS September 27, 2018

BALANCE SHEET (Btm) FY17 FY18 FY19F FY20F FY21F Cash & equivalents 21,333 15,129 7,535 10,792 9,817 A/C receivable 2,128 1,825 1,861 1,898 1,936 Inventory 0 0 0 0 0 Others 2,261 4,357 4,440 4,526 4,613 Total Current Assets 25,722 21,311 13,837 17,216 16,366 Property and equipment 10,534 8,530 8,285 8,030 7,764 Investments & associates 45,282 49,524 49,554 49,604 49,673 Goodwill 2,194 2,116 2,137 2,159 2,180 Other assets 9,899 24,576 45,008 59,149 83,047 Total Assets 93,631 106,058 118,821 136,157 159,031

Short-term debt 14,398 16,706 20,100 22,060 15,703 A/C payable 2,600 4,490 4,714 4,950 5,197 Other current liabilities 1,618 1,728 1,773 1,821 1,870 Total Current Liabilities 18,616 22,923 26,588 28,831 22,771 Long-term debt 23,313 30,463 39,000 53,500 81,500 Other liabilities 6,520 6,316 6,427 6,541 6,657 Total Liabilities 48,449 59,702 72,015 88,872 110,927

Share capital 47,740 47,761 47,761 47,761 47,761 Share premium 1,854 1,873 1,873 1,873 1,873 Treasury (925) (925) (925) (925) (925) Translation adjustment (336) (2,236) (2,236) (2,236) (2,236) Retained earnings (6,185) (5,868) (5,360) (4,824) (3,949) Total ordinary equity 42,147 40,605 41,114 41,650 42,525 Preferred equity 0 0 0 0 0 Minorities 3,035 5,750 5,692 5,635 5,579 Total equity & minorities 45,182 46,355 46,806 47,285 48,104 0 0 0 0 0 BV per ordinary share (Y/E, Bt) 3.56 3.43 3.47 3.52 3.59 Adjusted book value ps (Y/E, Bt) 3.56 3.43 3.47 3.52 3.59

RATIOS (%) FY17 FY18 FY19F FY20F FY21F Growth Turnover 27.2 78.8 141.6 (0.4) 24.7 EBITDA 44.2 22.7 33.4 27.6 28.3 EBIT 47.7 21.1 39.8 31.4 31.3 Net profit (51.5) 120.4 (42.4) 31.8 30.6 EPS pre extraordinary items (30.1) 77.4 1.0 31.8 30.6 EPS (diluted) (30.1) 77.4 1.0 31.8 30.6 DPS (50.0) 2.9 (51.0) 38.4 24.4 Accounting ratios Gross profit margin 43.9 33.6 18.3 21.5 21.3 Operating profit margin 17.2 14.8 8.5 9.2 8.9 EBITDA margin 53.3 36.6 20.2 25.9 26.6 EBIT margin 44.8 30.3 17.6 23.2 24.4 Net profit margin 29.4 36.3 8.6 11.4 12.0 ROA 2.1 4.2 2.1 2.5 2.8 ROE 4.4 9.5 5.4 7.1 9.1 Stability D/E (x) 1.1 1.3 1.5 1.9 2.3 Net D/E (x) 0.4 0.7 1.1 1.4 1.8 Interest Coverage Ratio 4.7 3.0 3.5 3.4 3.2 Current ratio (x) 1.4 0.9 0.5 0.6 0.7 Quick ratio (x) 1.3 0.9 0.5 0.6 0.7 Valuation (x) PER 44.0 20.7 43.6 33.1 25.3 Normalized PER 62.2 36.3 43.6 33.1 25.3 P/BV 2.1 2.2 2.7 2.7 2.6 EV/EBTDA 29.0 28.8 28.1 23.8 20.9 Dividend yield (%) 4.6 4.5 1.8 2.5 3.2

Krungsri Securities Research 14

CG Rating 2017 Companies with CG Rating

ADVANC AKP ANAN AOT AP BAFS BANPU BAY BCP BTS BWG CFRESH CHO CK CNT CPF CPN CSL DELTA DEMCO DRT DTAC DTC EASTW EGCO GC GCAP GFPT GOLD GPSC GRAMMY GUNKUL HANA HMPRO ICC ICHI INTUCH IRPC IVL JSP KBANK KCE KKP KTB KTC LHFG LPN MBK MCOT MINT MONO NCH NKI NYT OTO PDJ PHOL PLANB PPS PRG PSH PSL PTG PTT PTTEP PTTGC PYLON Q-CON QH QTC RATCH ROBINS SAMART SAMTEL SAT SC SCB SCC SCCC SDC SE-ED SIS SITHAI SNC SPALI SPRC SSSC STEC SVI SYNTEC TCAP THANA THCOM THREL TISCO TKT TMB TNDT TOP TRC TRUE TSC TTCL TU TVD UV VGI WACOAL WAVE

2S AAV ACAP AGE AH AHC AIRA AIT ALT AMANAH AMATA AMATAV APCO ARIP ASIA ASIMAR ASK ASP AUCT AYUD BBL BCPG BDMS BEC BEM BFIT BJC BJCHI BLA BOL BROOK BRR BTW CEN CENTEL CGH CHARAN CHEWA CHG CHOW CI CIG CIMBT CKP CM CNS COL COM7 CPI CSC CSP CSS DCC EA EASON ECF ECL EE EPG ERW FN FNS FORTH FPI FSMART FVC GBX GEL GLOBAL GLOW

HARN HYDRO ILINK INET IRC IT ITD JCKH JWD K KGI KKC KOOL KSL

KTIS L&E LALIN LANNA LH LHK LIT LOXLEY LRH LST M MACO MAJOR MAKRO

MALEE MBKET MC MEGA MFC MFEC MOONG MSC MTC MTI NOBLE NOK NSI NTV NWR OCC OGC OISHI ORI PAP PATO PB PCSGH PDI PE PG PJW PLANET PLAT PM PPP PREB PRINC PT RICHY RML RS RWI S S & J SABINA SALEE SAMCO SAWAD SCG SCI SCN SEAFCO SEAOIL SENA SFP SIAM SINGER SIRI SMK SMPC SMT SNP SORKON SPC SPI SPPT SR SSF SST STA STPI SUC SUSCO SUTHA SWC SYMC SYNEX TAE TAKUNI TASCO TBSP TCC TEAM TFG TGCI THAI THANI THIP THRE TICON TIPCO TIW TK TKN TKS TMC TMI TMILL TMT TNITY TNL TOG TPAC TPCORP TRT TRU TSE TSR TSTE TSTH TTA TTW TVI TVO TWP TWPC U UAC UMI UP UPF UPOIC UWC VIH VNT WICE WINNER XO YUASA ZMICO

7UP AEC AEONTS AF AJ AKR ALLA ALUCON AMA AMARIN AMC APURE AQUA ARROW AS ASEFA ASIAN ASN ATP30 AU B BA BCH BEAUTY BH BIG BIZ BLAND BPP BR BROCK BTNC CBG CCET CCP CGD CITY CMR COLOR COMAN CPL CSR

CTW CWT DCON DIGI DNA EFORL EKH EPCO ESSO ETE FE FOCUS FSS GENCO

GIFT GJS GLAND GSTEL GTB GYT HPT HTC HTECH IFS IHL INSURE IRCP J JCK JMART JMT JUBILE KASET KBS KCAR KIAT KWC KYE LDC LEE LPH MATCH MATI M-CHAI MDX META METCO MGT MILL MJD MK MODERN MPG NC NCL NDR NEP NETBAY NPK NPP NUSA OCEAN PDG PF PICO PIMO PK PL PLE PMTA PRECHA PRIN PSTC QLT RCI RCL RJH ROJNA RPC S11 SANKO SAPPE SCP SE SGP SKR SKY SLP SMIT SOLAR SPA SPCG SPG SPVI SQ SRICHA SSC STANLY SUPER SVOA T TACC TCCC TCMC TIC TLUXE TM TMD TNP TNR TOPP TPA

TPBI TPCH TPIPL TPOLY TPP TRITN TTI TVT TYCN UOBKH UPA UREKA UT VIBHA

VPO WIIK WIN

Disclaimer 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 assessment of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, verify, or certify the accuracy and completeness of such survey result.

Anti-corruption Progress Indicator 2018

Companies that have declared their intention to join CAC

A ABICO AIE AJ AMATA AMATAV ANAN AOT APCO APCS ARROW ASIAN B BGRIM BJC BJCHI BLAND BLISS BM BPP BR BSBM BUI CEN CGH CHEWA CHG CHO CI COL COM7 CPR DDD EFORL EKH ESTAR FLOYD FN FPI FTE GJS GPI GSTEL GYT HARN ICHI ILINK ITEL JAS JTS KWC KWG LDC LEE LIT LRH MATCH MATI MBAX MFEC MILL MTC NCL NEP NNCL NWR PAP PK PL PLANB POST PRM PRO PYLON QTC ROJNA RWI SAPPE SCI SELIC SHANG SST STA STANLY SUPER SWC SYMC SYNEX THE THIP TKN TMC TNP TNR TOPP TRITN TTI TVO TWPC UEC UKEM UPA UWC VIH XO YUASA Companies certified by CAC

ADVANC AKP AMANAH AP ASK ASP AYUD BAFS BANPU BAY BBL BCH BCP BCPG BKI BLA BROOK BRR BTS BWG CENTEL CFRESH CIG CIMBT CM CNS CPALL CPF CPI CPN CSC CSL DCC DEMCO DIMET DRT DTAC DTC EASTW ECL EGCO EPCO FE FNS FSS GBX GC GCAP GEL GFPT GGC GLOW GOLD GPSC GUNKUL HANA HMPRO HTC ICC IFEC IFS INET INTUCH IRPC IVL K KASET KBANK KBS KCE KGI KKP KSL KTB KTC L&E LANNA LHFG LHK LPN M MAKRO MALEE MBK MBKET MC MCOT MFC MINT MONO MOONG MSC MTI NBC NINE NKI NMG NSI OCC OCEAN OGC PATO PB PCSGH PDG PDI PDJ PE PG PHOL PLANET PLAT PM PPP PPS PREB PRG PRINC PSH PSL PSTC PT PTG PTT PTTEP PTTGC Q-CON QH QLT RATCH RML ROBINS S & J SABINA SAT SC SCB SCC SCCC SCG SCN SE-ED SENA SGP SINGER SIRI SIS SITHAI SMIT SMK SMPC SNC SNP SORKON SPACK SPC SPI SPRC SRICHA SSF SSI SSSC SUSCO SVI SYNTEC TAE TASCO TCAP TCMC TFG TFI TFMAMA TGCI THANI THCOM THRE THREL TICON TIP TIPCO TISCO TKT TLUXE TMB TMD TMILL TMT TNITY TNL TOG TOP TPA TPCORP TRU TRUE TSC TSTH TTCL TU TVD TVI U UBIS UOBKH VGI VNT WACOAL WHA WICE N/A 2S 7UP AAV ABM ACAP ACC ADAM ADB AEC AEONTS AF AFC AGE AH AHC AI AIRA AIT AJA AKR ALLA ALT ALUCON AMA AMARIN AMC APEX APURE AQ AQUA ARIP AS ASAP ASEFA ASIA ASIMAR ASN ATP30 AU AUCT BA BAT-3K BDMS BEAUTY BEC BEM BFIT BGT BH BIG BIZ BKD BOL BROCK BSM BTNC BTW CBG CCET CCP CGD CHARAN CHAYO CHOTI CHOW CHUO CITY CK CKP CMAN CMO CMR CNT COLOR COMAN CPH CPL CPT CRANE CRD CSP CSR CSS CTW CWT D DCON DCORP DELTA DIGI DNA DOD DTCI EA EARTH EASON ECF EE EIC EMC EPG ERW ESSO ETE EVER F&D FANCY FC FMT FOCUS FORTH FSMART FVC GENCO GIFT GL GLAND GLOBAL GRAMMY GRAND GREEN GTB GULF HFT HPT HTECH HUMAN HYDRO ICN IEC IHL III INGRS INOX INSURE IRC IRCP IT ITD J

JCK JCKH JCT JKN JMART JMT JSP JUBILE JUTHA JWD KAMART KC KCAR KCM

KDH KIAT KKC KOOL KTECH KTIS KYE LALIN LH LOXLEY LPH LST LTX LVT

MACO MAJOR MANRIN MAX M-CHAI MCS MDX MEGA META METCO MGT MIDA MJD MK

ML MM MODERN MPG MPIC NC NCH NDR NETBAY NEW NEWS NFC NOBLE NOK NPK NPP NTV NUSA NVD NYT OHTL OISHI ORI OTO PACE PAE PAF PERM PF PICO PIMO PJW PLE PMTA POLAR POMPUI PORT PPM PRAKIT PRECHA PRIN PTL RAM RCI RCL RICH RICHY RJH ROCK ROH RP RPC RPH RS RSP S S11 SAFARI SALEE SAM SAMART SAMCO SAMTEL SANKO SAUCE SAWAD SAWANG SCP SDC SE SEAFCO SEAOIL SF SFP SGF SIAM SIMAT SKE SKN SKR SKY SLP SMART SMM SMT SOLAR SPA SPALI SPCG SPG SPORT SPPT SPVI SQ SR SSC SSP STAR STEC STHAI STPI SUC SUN SUTHA SVH SVOA T TACC TAKUNI TAPAC TBSP TC TCB TCC TCCC TCJ TCOAT TEAM TGPRO TH THAI THANA THG THL THMUI TIC TITLE TIW TK TKS TM TMI TMW TNDT TNH TNPC TOA TPAC TPBI TPCH TPIPL TPIPP TPOLY TPP TR TRC TRT TRUBB TSE TSF TSI TSR TSTE TTA TTL TTTM TTW TUCC TVT TWP TWZ TYCN UAC UMI UMS UNIQ UP UPF UPOIC UREKA UT UTP UV UVAN VARO VCOM VI VIBHA VNG VPO WAVE WG WHAUP WIIK WIN WINNER WORK WORLD WP WPH WR YCI YNP ZIGA ZMICO Disclaimer The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company . The assessment result is therefore made from the perspectiv e of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, Krungsri Securities Public Company Limited does not confirm, verify, or certify the accuracy and completeness of the assessment result." Reference Disclosure: Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of July 31, 2017) are categorised into: • Companies that have declared their intention to join CAC • Companies certified by CAC.

Krungsri Securities Public Company Limited

Headquarters 898 Ploenchit Tower, 3rd Floor, Ploenchit Road, Lumpini Pathumwan, Bangkok 10330 Tel: 0-2659-7000 Fax: 0-2658-5699 Internet Trading: 0-2659-7777 Branches Emporium Nakhon Pathom 662 Emporium Tower, Fl. 10, Sukhumvit 24 Road 67/1 Ratchadamnoen Road, Tambol Phra Pathom Jaedee, Klongton, Klongtoey, Bangkok 10110 Amphur Muang, Nakhon Pathom 73000 Tel: 0-2695-4500 Fax: 0-2695-4599 Tel: 0-3427-5500-7 Fax: 0-3421-8989

Central Bangna Suphanburi 589/151 Central City Tower 1 Office, Fl. 27 249/171-172 Moo 5 Tambol Ta Rahad, Debaratana Road, Bangna, Bangkok 10260 Amphur Muang, Suphanburi, 72000 Tel: 0-2763-2000 Fax: 0-2399-1448 Tel: 0-3596-7981 Fax: 0-3552-2449

Rama II Nakhon Ratchasima 111/917-919 Rama II Road, Smaedum, 168 Chomphon Road, Tambol Nai Muang, Bangkhuntien, Bangkok 10150 Amphur Muang Nakhon Ratchasima, Tel: 0-2013-7145 Fax: 0-2895-9557 Nakhon Ratchasima 30000 Tel: 0-4425-1211-4 Fax: 0-4425-1215 Vibhavadi-rangsit Bank of Ayudhya Public Company Limited Khon Kaen 123 Suntowers (B) Building, Vibhavadirangsit Road, 114 Sri Chan Road, Tambol Nai Muang, Jompol, Jatujak, Bangkok 10900 Amphur Muang, Khon Kaen 40000 Tel: 0-2273-8388 Fax: 0-2273-8399 Tel: 0-4322-6120 Fax: 0-4322-6180

Chonburi Chiang Mai 64/17 Sukhumvit Road, Tambol Bang Plasoi, 70 Chang Phuak Road, Tambol Sri Phum Amphur Muang, Chonburi 20000 Amphur Muang, Chiang Mai 50200 Tel: 0-3312-6580 Fax: 0-3312-6588 Tel: 0-5321-9234-6 Fax: 0-5321-9247

Hat Yai Branch Chiang Rai 90-92-94 Nipat U Tit Nueng Road,Tambol Hat Yai, 231-232 Thamalai Road, Tambol Wiang, Amphur Hat Yai, Songkhla 90110 Amphur Muang, Chiang Rai 57000 Tel: 0-7422-1229 Fax: 0-7422-1411 Tel: 0-5371-6489 Fax: 0-5371-6490

Phitsanulok 275/1 Phichaisongkram Road, Tambol Nai Muang, Amphur Muang, Phitsanulok 65000 Tel: 0-5530-3360 Fax: 0-5530-2580 Central line: Analyst Team Sector Coverage 662-659-7000 E-mail Isara Ordeedolchest, Head of Research Strategy ext. 5001 [email protected] Naphat Chantaraserekul Energy, Petrochemical ext. 5000 [email protected] Kittisorn Pruitipat, CFA, FRM Property, ICT, Contractor ext. 5019 [email protected] Jesada Techahusdin, CFA Banking, Consumer Finance, Insurance ext. 5004 [email protected] Sunthorn Thongthip InsuranceFood, Transportation Insurance ext. 5009 [email protected] Worrapong Tuntiwutthipong Electronic, Automotive, Commerce ext. 5016 [email protected] Karun Intrachai MediaUtilities Energy, Food ext. 5010 [email protected] Teerapol Udomvej, CFA Healthcare, Tourism ext. 5012 [email protected] Kitti Pitakteerabandit Transportation, Media ext. 5008 [email protected] Artit Jansawang Mid - Small cap, MAI ext. 5005 [email protected] Kaushal Ladha, CFA, Assistant Analyst Strategy Nalinee Praman, Assistant Analyst Mid - Small cap, MAI Chaiyot Jiwagkul Technical ext. 5006 [email protected] Definition of Ratings Fax 662-658-5643

OUTPERFORM - Stocks with an expected capital gain above 10% in the next 12 months for small-caps, above 5% for big-caps NEUTRAL - Stocks with an expected capital gain between -10% and +10% in the next 12 months for small-caps, -5% to +5% for big-caps

UNDERPERFORM - Stocks with an expected capital gain below 10% in the next 12 months for small-caps, below 5% for big-caps www.krungsrisecurities.com