Company Guide Siam Commercial

Version 12 | Bloomberg: SCB TB | Reuters: SCB.BK Refer to important disclosures at the end of this report

DBS Group Research . Equity 20 Jan 2020

FULLY VALUED (Downgrade from HOLD) Escalating risks

Last Traded Price ( 17 Jan 2020): Bt117 (SET : 1,600.48) Thesis. Asset quality still an issue to watch. On top of high Price Target 12-mth: Bt104 (11% downside) (Prev Bt128) operating costs (from the bank’s transformation project) as

Analyst well as an elevated cost-to-income ratio (as revenue growth Thaninee SATIRAREUNGCHAI, CFA +662 857 7837 may not keep up with higher costs), our concern on asset [email protected] quality remains. Over the past few years, SCB’s asset quality has proven to be problematic. Recently, (another) one of its big

corporate clients has just defaulted, and the bank had to What’s New provide a sizeable credit cost for such loans. Besides, with the • 4Q19 net profit came in at Bt5.5bn (-22.3% y-o-y; - bank’s strategy to seek higher yields from higher-risk 62.8% q-o-q), 45% below Bloomberg consensus, unsecured lending and small SME loans, it will incur higher taking FY19 earnings to Bt40.4bn (+0.9% y-o-y) credit costs that will add more pressure on its bottom line.

• Asset quality deteriorated: NPL ratio rose to 3.41% at Where we differ. Market underestimates SCB’s operating end-FY19, vs. 2.85% at end-FY18 costs. Though SCB has guided for declining cost-to-income • FY20F earnings cut by 9% ratio, citing it can monetise those acquired digital customers and can grow revenue faster than costs, we keep our high • Downgrade to FULLY VALUED with a lower TP of Bt104 cost-to-income ratio assumption for FY20F.

Potential catalysts. Cost savings kick in faster than Price Relative expected. SCB’s heavy investment in its transformation projects and massive expenses on its marketing campaign to acquire new digital customers should eventually lower the ’ operating costs and lift its CASA, thus reducing its funding costs. If these cost savings kick in sooner than expected, we (as well as consensus) will have to revise our earnings estimates.

Valuation: We downgrade SCB to FULLY VALUED (from HOLD), given our escalating concerns on the bank’s asset quality and operating Forecasts and Valuation costs, as well as its weaker earnings growth in FY20F. Our new TP FY Dec (Btm) 2018A 2019A 2020F 2021F is based on 0.85x FY20F BV, implying -2SD to its LT average PBV. Pre-prov. Profit 73,539 95,529 68,973 72,500 Net Profit 40,068 40,436 35,424 37,603 Key Risks to Our View: Net Pft (Pre Ex.) 40,068 40,436 35,424 37,603 Better-than-expected cost management, asset quality, and Net Pft Gth (Pre-ex) (%) (7.1) 0.9 (12.4) 6.2 loan demand will present upside risks to our forecasts. In the EPS (Bt) 11.8 11.9 10.4 11.1 EPS Pre Ex. (Bt) 11.8 11.9 10.4 11.1 meantime, if the economy takes too long to recover or the EPS Gth Pre Ex (%) (7) 1 (12) 6 investment cycle is delayed, there could be downside risks to Diluted EPS (Bt) 11.8 11.9 10.4 11.1 SCB’s loan and earnings growth, as well as its asset quality. PE Pre Ex. (X) 9.9 9.8 11.2 10.6 Net DPS (Bt) 5.50 5.50 5.50 5.50 At A Glance Div Yield (%) 4.7 4.7 4.7 4.7 Issued Capital (m shrs) 3,396 ROAE Pre Ex. (%) 10.8 10.4 8.7 8.8 Mkt. Cap (Btm/US$m) 397,283 / 13,070 ROAE (%) 10.8 10.4 8.7 8.8 Major Shareholders (%) ROA (%) 1.3 1.3 1.2 1.2 His Majesty King Maha 23.38 BV Per Share (Bt) 112 118 123 128 VayupakBodindradebayavarangkun Fund 23.12 P/Book Value (x) 1.0 1.0 1.0 0.9 Thai NVDR 9.11 Earnings Rev (%): (9) - Free Float (%) 73.95 Consensus EPS (Bt): 12.9 12.1 13.0 3m Avg. Daily Val (US$m) 34.4 Other Broker Recs: B: 20 S: 2 H: 7 GIC Industry : Financial / Banks

Bloomberg ESG disclosure score (2018)^ 43.9 Source of all data on this page: Company, DBSVTH, Bloomberg Finance L.P. - Environmental / Social / Governance 33.9 / 45.0 / 62.5 for Environmental, Social and Governance, respectively.

ed: KK/ sa: PY, CS Company Guide

Siam Commercial Bank

WHAT’S NEW Asset quality deteriorated further

Results came in below expectations. 4Q19 net profit came in loans (personal loans and credit card receivables) expanded at Bt5.5bn (-22.3% y-o-y; -62.8% q-o-q), 43% below our 24.5% to Bt136bn, in line with the bank’s strategy to grow forecast and 45% below Bloomberg consensus, taking FY19 high-margin loans; meanwhile, auto loans expanded 7.9% to earnings to Bt40.4bn (+0.9% y-o-y), 9% below expectations. Bt219bn, thanks to strong new car sales in 1H19 and ‘My The higher-than-expected provision in 4Q19 was the key Car, My Cash’ loans. reason for the disappointing results. In terms of loan breakdown, retail loans accounted for 47.6% Operating earnings (PPOP) dropped 6.4% in FY19. Pre- of total loans; corporate loans 35.8%, and SME loans at provision operating profit (PPOP) came in at Bt14.7bn (- 16.6%. Of the retail loans, 64.5% were housing loans 12.8% y-o-y; -13.1% q-o-q) in 4Q19. The decline was due (30.7% of total loans), 21.8% were auto loans (10.3% of mainly to higher operating expenses (+14.6% y-o-y and total loans), and 13.5% were unsecured loans (6.4% of total +5.2% q-o-q). Such increases were attributed to higher staff loans). costs (from changing mix of skillsets), higher amortisation of Asset quality deteriorated further. Non-performing loans software licence, higher depreciation from transformation (NPLs) increased 10.4% q-o-q and 21.1% y-o-y to Bt85.2bn projects, and IT-related expenses. at end-FY19. The increase was due to the deterioration of FY19 PPOP also declined by 6.4% to Bt66.1bn, attributed to loan quality across all segments from the economic situation (i) lower gain on trading and FX transactions, (ii) lower and the bank’s qualitative loan classification of some dividend income, (iii) lower net insurance premiums (i.e. the corporate and SME customers. NPL ratio increased to 3.41% net insurance premiums were Bt682m in FY18 vs. negative at end-FY19, vs. 3.01% at end-3Q19 and 2.85% at end- Bt396m in FY19; note that SCB sold SCB Life and booked the FY18. Bt24bn one-time gain on sales in 3Q19), and (iv) higher New NPL formation in FY19 trended up significantly across all operating expenses (from higher staff costs, mainly from the segments (except for housing loans). In 4Q19, new NPL Bt1.4bn one-time adjustment of employee benefits recorded formation remained high and was attributed to the bank’s in 1Q19, higher amortisation of software licence, and higher qualitative classification of some corporate and SME depreciation from transformation programs). customers, as well as the deterioration of certain SME and Nonetheless, NII expanded in FY19, thanks to NIM expansion retail portfolios. (+13.6bps) following the bank’s strategy to grow high margin Special mention loans also increased 20.4% y-o-y from the loans, despite their standard lending rates (i.e. MOR and SME and retail (particularly auto loans) segments but MRR) cuts in 2H19. decreased 0.5% q-o-q to Bt65bn at end-FY19. Fee income expanded 25.8% y-o-y and 14.0% q-o-q in Such deteriorated asset quality resulted in a high credit cost 4Q19, and 4.3% in FY19, thanks particularly to the new of 180bps (i.e. Bt9.6bn) in 4Q19, driving up FY19 credit cost source of fee income generated by the bancassurance to 170bps (vs. 167bps in FY18). Coverage ratio however partnership with FWD, as well as mutual fund fees. decreased to 134.1% at end-FY19, vs. 143.8% at end-3Q19 With that, in 4Q19, non-NII also increased 34.4% y-o-y but and 146.7% at end-FY18. declined 64.8% q-o-q (as SCB booked the Bt24bn one-time Announced a special dividend of Bt0.75/share. SCB gain on sales of SCB Life in 3Q19); non-NII rose 59.3% in announced a special interim dividend of Bt0.75/share, FY19. following its sales of SCB Life in 3Q19, to be paid on 14 Feb FY19 loans contracted by 1.3% y-o-y. On a q-o-q basis, loan 2020. XD is on 30 Jan 2020. The bank also changed its contraction in 4Q19 was due to the corporate segment (- dividend payment policy from “approximately 30-50% of 5.4%), while retail (+0.6%) and SME (+0.1%) loans were flat. consolidated annual net profit” to “not less than 30% of Of the retail loans, however, unsecured loans grew strongly consolidated annual net profit”. 8.6%, while auto loans (-1.4%) and housing loans (-0.3%) Note that the bank already paid the Bt1.50/share interim decreased. dividend (for its 1H19 performance) on 13 Sep 2019, while On a y-o-y basis, the contraction was attributed mainly to the final dividend will be announced in April 2020 (after its corporate loan repayment (-9.0%), while retail (+4.0%) and AGM). SME (+2.8%) loans expanded. Of the retail loans, unsecured

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Company Guide

Siam Commercial Bank

FY20F earnings cut by 9%. After the announcement of SCB’s Downgrade to FULLY VALUED with a lower TP of Bt104. We FY19 performance, our concerns on the bank’s asset quality downgrade SCB to FULLY VALUED (from HOLD), given our and operating costs escalated. We cut our FY20F forecast by escalating concerns on the bank’s asset quality and operating another 9% to incorporate higher operating costs, i.e. we costs, as well as its weaker earnings growth in FY20F. Our raise our cost-to-income ratio to 47.25% (from 45.75%), and new TP is based on 0.85x FY20F BV, implying -2SD to its LT cut non-NII growth to -45% (from -35%), while keeping fee average PBV. income growth at 4%. Specifically, we lower our estimates

on gains on trading and FX transactions to -30% (from -10%) to reflect the economic outlook.

Note that we had cut our FY20F once after the bank’s 9M19 result announcement. That time, we cut loan growth (from 7% to 4%), lower NIM (from 3.3% to 3.1%), and lower provisions (to be in line with lower loan growth, from Bt30bn

to Bt24bn). We keep those unchanged this time. Now we

forecast FY20F earnings to drop 12.4% y-o-y.

SCB: 4Q19 and 2019 results review Bt m 4Q19 4Q18 y-o-y (%) 3Q19 q-o-q (%) 2019 2018 y-o-y (%) NII 22,960 24,798 (7.4) 26,191 (12.3) 99,402 96,369 3.1 Fee income, net 8,427 6,700 25.8 7,391 14.0 29,670 28,456 4.3 Non-NII 12,074 8,983 34.4 34,260 (64.8) 66,696 41,855 59.3 Total operating income 35,035 33,781 3.7 60,452 (42.0) 166,098 138,225 20.2 Total operating expenses 18,483 16,129 14.6 17,563 5.2 70,538 64,639 9.1 PPOP 14,693 16,841 (12.8) 16,915 (13.1) 66,123 70,609 (6.4) Provision 9,608 8,871 8.3 15,273 (37.1) 36,211 24,023 50.7 Net profit 5,506 7,084 (22.3) 14,798 (62.8) 40,436 40,068 0.9 EPS (Bt) 1.62 2.09 (22.3) 4.36 (62.8) 11.92 11.81 0.9 % 4Q19 4Q18 y-o-y (ppts) 3Q19 q-o-q (ppts) 2019 2018 y-o-y (ppts) NIM (bps change) 3.2 3.3 (5.5) 3.7 (47.8) 3.3 3.2 13.6 ROAA 0.7 0.9 (0.2) 1.9 (1.2) 1.3 1.3 0.0 ROAE 5.5 7.5 (2.0) 15.0 (9.4) 10.4 10.8 (0.4) Cost-to-income ratio 52.8 47.7 5.0 29.1 23.7 42.5 46.8 (4.3) Bt bn 4Q19 4Q18 y-o-y (%) 3Q19 q-o-q (%) 2019 2018 y-o-y (%) Loans 2,117 2,144 (1.3) 2,153 (1.7) 2,117 2,144 (1.3) Deposits 2,159 2,160 (0.0) 2,194 (1.6) 2,159 2,160 (0.0) % 4Q19 4Q18 y-o-y (ppts) 3Q19 q-o-q (ppts) 2019 2018 y-o-y (ppts) LDR 98.0 99.3 (1.2) 98.2 (0.1) 98.0 99.3 (1.2) LDR+borrowings 94.6 94.6 0.0 94.3 0.4 94.6 94.6 0.0 Coverage ratio 134.1 146.7 (12.6) 143.8 (9.7) 134.1 146.7 (12.6) NPL 3.4 2.9 0.5 3.0 0.4 3.4 2.9 0.5 CAR 18.1 17.1 1.0 17.9 0.2 18.1 17.1 1.0 T1 17.0 15.1 1.9 16.8 0.2 17.0 15.1 1.9 T2 1.1 2.0 (0.9) 1.1 0.0 1.1 2.0 (0.9) Source of all data: Company, DBSVTH

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Company Guide

Siam Commercial Bank

Margin Trends CRITICAL DATA POINTS TO WATCH

Critical Factors Shifting toward retail unsecured lending and small SME loans. SCB has guided that it will shift loan portfolio towards higher-yield lending in a bid to better utilise its capital. In 2018, the bank has gradually slowed down its mortgage lending, citing high competition and higher risk in general. In 2019, it is targeting to only maintain its market share in the mortgage market but to grow unsecured lending and small SME loans.

NIM to contract in FY20F. With the effect from sale of SCB Life in 3Q19, Gross Loan& Growth NIM looked abnormally high in 2019. As such, when comparing with FY19, we believe the average yield in FY20F will go (down) back to normal, while cost of funds may be relatively stable. With that, NIM is likely to contract in FY20F. However, the shift in loan mix towards higher- yield unsecured loans and small SME loans (if successful) should help support average yield somewhat, and on the cost side, some of the matured debenture in 2H19 may help alleviate funding costs in FY20F.

Non-interest income to be volatile with gain/loss on (mark-to-market) investments. With the bank’s fee waiver scheme launched at end-Mar Customer Deposit & Growth 2018, banking transactions will no longer be the source of fee income for the bank, while loan-related fees may increase with loan growth, especially if the bank can grow small SME loans as planned. Nonetheless, SCB’s fee income will be shored up with c.Bt300m/quarter access fee income from FWD over the next 15 years. However, under TFRS9, if the bank chooses to classify its (securities) investments as Fair Value through P&L, the bank will have to mark to market gain/loss on investments every quarter, making the non-NII, and the bank’s earnings, much volatile.

Cost-to-income ratio to remain high. While the bank has guided for lower cost-to-income ratio, given that the expenses related to the bank’s transformation program has passed the peak and that it can monetise Loan-to-Deposit Ratio Trend those customers acquired in 2018, we believe such development takes time and thus maintain our high cost-to-income ratio assumption in FY20F.

Under TFRS9, FY20F credit cost should reflect the bank’s asset quality and its outlook. With SCB’s strategy is to seek higher yield from higher risk loans, it is likely that credit cost could be higher. However, under TFRS9, that depends on the quality of the loans and their outlook. With that, we believe the credit cost, as well as the bank’s earnings, would be volatile quarter by quarter.

Cost & Income Structure

Source: Company, DBSVTH

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Company Guide

Siam Commercial Bank

Asset Quality Balance Sheet: Asset quality may slip further. Over the past few years, we have seen that SCB’s corporate loan portfolio is quite problematic. One of reasons may be the size of the loans. During the prolonged sluggish economy, like this time, loans taken by some corporates that have been facing prolonged liquidity problems may eventually turn into NPLs at the bank. We thus are concerned that should the economy remain slow, more sizeable corporate NPL may emerge at the bank. Capitalisation (%) Capital ratio remains robust. Capital adequacy remains sufficient to support business growth. Its CAR ratio remains higher than the 12.00% required by the , while its CET 1 and Tier 1 capital ratios are also higher than the minimum requirements of 8.00% and 9.50%, respectively, under Basel III, for 2020.

Share Price Drivers: Government infrastructure investment projects. The growth of Thailand’s economy and the banking sector looks set to depend on the execution of ROE (%) infrastructure investments.

Special dividend. The announcement of a special dividend from the gain on sale of SCB Life in 3Q19 should drive the share price.

Key Risks: Prolonged weakness of the economy. If the economy takes too long to recover, or the investment cycle is delayed, there could be downside risks to SCB’s asset quality, loan growth, and earnings growth. Forward PE Band (x)

Environment, Social, Governance: SCB has good disclosure with clarity and transparency in its environment, social, governance (ESG) and financial reports. SCB has made regular disclosures regarding its financial and operation activities.

Company Background Siam Commercial Bank Public Company Limited (SCB) provides a full range of banking and financial services. The bank offers corporate and PB Band (x) personal lending, retail and wholesale banking, international trade financing, and investment banking services to its clients.

Environment, Social, Governance

Source: Company, DBSVTH

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Company Guide

Siam Commercial Bank

Key Assumptions FY Dec 2017A 2018A 2019A 2020F 2021F

Gross Loans Growth 4.9 5.2 (1.3) 3.6 3.6 Customer Deposits Growth 3.3 3.2 0.0 4.1 4.1 Yld. On Earnings Assets 4.4 4.3 4.5 4.3 4.3 Avg Cost Of Funds 1.4 1.4 1.5 1.4 1.4

Income Statement (Btm) FY Dec 2017A 2018A 2019A 2020F 2021F

Net Interest Income 92,310 96,369 99,402 90,457 94,060 Non-Interest Income 43,912 41,808 66,666 38,684 39,919 Operating Income 136,222 138,177 166,067 129,141 133,978 Operating Expenses (57,650) (64,639) (70,538) (60,168) (61,478) Pre-provision Profit 78,572 73,539 95,529 68,973 72,500 Provisions (25,067) (24,023) (36,211) (23,656) (24,508) Associates (9.1) 47.4 30.8 (1,828) (1,828) Exceptionals 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 53,496 49,563 59,349 43,489 46,164 Taxation (10,291) (9,468) (19,098) (8,698) (9,233) Minority Interests (52.7) (27.5) 185 633 672 Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 43,152 40,068 40,436 35,424 37,603 Net Profit bef Except 43,152 40,068 40,436 35,424 37,603 Growth (%) Net Interest Income Gth 4.4 4.4 3.1 (9.0) 4.0 Net Profit Gth (9.4) (7.1) 0.9 (12.4) 6.2 Margins, Costs & Efficiency (%) Spread 2.9 2.9 3.1 2.9 2.9 Net Interest Margin 3.2 3.2 3.3 3.1 3.1 Cost-to-Income Ratio 42.3 46.8 42.5 47.3 46.5 Business Mix (%) Net Int. Inc / Opg Inc. 67.8 69.7 59.9 70.0 70.2 Non-Int. Inc / Opg inc. 32.2 30.3 40.1 30.0 29.8 Fee Inc / Opg Income 22.3 20.6 17.9 23.9 24.0 Oth Non-Int Inc/Opg Inc 10.0 9.7 22.3 6.1 5.8 Profitability (%) ROAE Pre Ex. 12.4 10.8 10.4 8.7 8.8 ROAE 12.4 10.8 10.4 8.7 8.8 ROA Pre Ex. 1.5 1.3 1.3 1.2 1.2 ROA 1.5 1.3 1.3 1.2 1.2 Source: Company, DBSVTH

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Company Guide

Siam Commercial Bank

Quarterly / Interim Income Statement (Btm) FY Dec 4Q2018 1Q2019 2Q2019 3Q2019 4Q2019

Net Interest Income 24,798 24,713 25,536 26,191 22,960 Non-Interest Income 9,103 9,826 10,505 33,803 12,531 Operating Income 33,901 34,539 36,041 59,995 35,492 Operating Expenses (16,129) (17,835) (16,657) (17,563) (18,483) Pre-Provision Profit 17,772 16,704 19,384 42,432 17,009 Provisions (8,871) (5,420) (5,909) (15,273) (9,608) Associates (120) 30.8 0.0 457 (457) Exceptionals 0.0 0.0 0.0 0.0 0.0 Pretax Profit 8,782 11,315 13,475 27,616 6,944 Taxation (1,704) (2,155) (2,530) (12,877) (1,536) Minority Interests 6.09 (2.9) 30.8 59.1 98.4 Net Profit 7,084 9,157 10,976 14,798 5,506

Growth (%) Net Interest Income Gth 1.7 (0.3) 3.3 2.6 (12.3) Net Profit Gth (32.6) 29.3 19.9 34.8 (62.8)

Balance Sheet (Btm) FY Dec 2017A 2018A 2019A 2020F 2021F

Cash/Bank Balance 40,797 47,117 47,615 51,130 38,384 Government Securities 0.0 0.0 0.0 0.0 0.0 Inter Bank Assets 316,733 377,905 433,510 464,466 514,926 Total Net Loans & Advs. 1,948,070 2,040,622 2,002,461 2,074,563 2,149,220 Investment 570,371 568,854 312,065 312,065 312,065 Associates 0.0 47.4 78.2 78.2 78.2 Fixed Assets 44,164 43,206 40,777 40,777 40,777 Goodwill 0.0 0.0 0.0 0.0 0.0 Other Assets 103,897 109,589 127,240 127,240 127,240 Total Assets 3,024,032 3,187,340 2,963,746 3,070,319 3,182,690

Customer Deposits 2,092,457 2,159,631 2,159,425 2,247,107 2,338,348 Inter Bank Deposits 108,573 142,529 145,844 145,844 145,844 Debts/Borrowings 100,884 136,663 111,295 114,059 116,920 Others 358,355 367,534 146,335 146,335 146,335 Minorities 299 956 489 (144) (816) Shareholders' Funds 363,464 380,027 400,358 417,119 436,058 Total Liab& S/H’s Funds 3,024,032 3,187,340 2,963,746 3,070,319 3,182,690

Source: Company, DBSVTH

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Company Guide

Siam Commercial Bank

Financial Stability Measures (%) FY Dec 2017A 2018A 2019A 2020F 2021F

Balance Sheet Structure Loan-to-Deposit Ratio 93.1 94.5 92.7 92.3 91.9 Net Loans / Total Assets 64.4 64.0 67.6 67.6 67.5 Investment / Total Assets 18.9 17.8 10.5 10.2 9.8 Cust . Dep./Int. Bear. Liab. 90.8 89.1 90.2 90.4 90.6 Interbank Dep / Int. Bear. 4.7 5.9 6.1 5.9 5.7 Asset Quality NPL / Total Gross Loans 2.8 2.9 3.4 3.4 3.4 NPL / Total Assets 2.0 1.9 2.1 2.1 2.1 Loan Loss Reserve Coverage 137.3 146.7 134.1 148.3 148.7 Provision Charge-Off Rate 1.2 1.1 1.7 1.1 1.1 Capital Strength Total CAR 17.7 17.1 18.1 19.3 18.5 Tier-1 CAR 15.6 15.1 17.0 18.2 17.4

Source: Company, DBSVTH

Target Price & Ratings History

Source: DBSVTH Analyst: Thaninee SATIRAREUNGCHAI, CFA

THAI-CAC (as of Nov 2018) Certified Corporate Governance CG Rating (as of Oct 2018)

THAI-CAC is Companies participating in Thailand's Private Sector Score Description Collective Action Coalition Against Corruption programme (Thai CAC) Declared Companies that have declared their intention to join CAC under Thai Institute of Directors (as of May 2018) are categorised into: Certified Companies certified by CAC. Score Range Number of Logo Description Corporate Governance CG Rating is based on Thai Institute of 90-100 Excellent Directors (IOD)’s annual assessment of corporate governance practices 80-89 Very Good of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), disclosure 70-79 Good and transparency (20%), role of stakeholders (20%), equitable treatment of shareholders (10%) and rights of shareholders (15%). 60-69 Satisfactory

The IOD then assigns numbers of logos to each company based on 50-59 Pass their scoring as follows: <50 No logo given N/A

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Company Guide

Siam Commercial Bank

^ Bloomberg ESG Disclosure Scores rate companies annually based on their disclosure of quantitative and policy-related ESG data. It is based on a scoring scale of 0-100, and calculated using a subset of more than 100 raw data points it collects on ESG. It is designed to measure the robustness of companies' disclosure of ESG information in their reporting/the public domain. Based on Bloomberg disclosures, as of 25 Jan 2019, the global ESG disclosure average score is 24.92 and 22.14, 28.26, 49.97 for Environmental, Social and Governance, respectively.

DBSVTH recommendations are based on on Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return, i.e., > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame) *Share price appreciation + dividends

Completed Date: 20 Jan 2020 07:09:12 (THA) Dissemination Date: 20 Jan 2020 09:23:47 (THA)

Sources for all charts and tables are DBSVTH unless otherwise specified.

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH'').

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

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Company Guide

Siam Commercial Bank

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or 2 his associate does not have financial interests in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary position in Siam Commercial Bank recommended in this report as of 31 Dec 2019. 2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Siam Commercial Bank

RESTRICTIONS ON DISTRIBUTION General 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.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

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Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

United This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Kingdom Commission, Thailand.

This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, International Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated Financial by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the Centre DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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Siam Commercial Bank

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 13th Floor One Island East, 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 18 Westlands Road, Capital Square, Marina Bay Financial Centre Tower 3 Quarry Bay, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

THAILAND INDONESIA DBS Vickers Securities (Thailand) Co Ltd PT DBS Vickers Sekuritas (Indonesia) Contact: Chanpen Sirithanarattanakul Contact: Maynard Priajaya Arif 989 Siam Piwat Tower Building, DBS Bank Tower 9th, 14th-15th Floor Ciputra World 1, 32/F Rama 1 Road, Pathumwan, Jl. Prof. Dr. Satrio Kav. 3-5 Thailand 10330 Jakarta 12940, Indonesia Tel. 66 2 857 7831 Tel: 62 21 3003 4900 Fax: 66 2 658 1269 Fax: 6221 3003 4943 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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