Company Guide Kiatnakin

Version 5 | Bloomberg: KKP TB | Reuters: KKP.BK Refer to important disclosures at the end of this report DBS Group Research . Equity 26 Jul 2018

BUY Promising growth prospect Last Traded Price ( 25 Jul 2018): Bt72.50 (SET : 1,690.08) Price Target 12-mth: Bt92.00 (27% upside) (Prev Bt88.00) Thesis. Decent growth, high dividend yield. We like KKP for its continual operating improvements in both its commercial Analyst banking and capital market businesses, thanks to the synergies Thaninee SATIRAREUNGCHAI, CFA +662 857 7837 [email protected] between (previously) KK (commercial banking business) and PHATRA (capital market business). KKP is ready to grow with the economy, given its strong capital structure and recently What’s New developed internal models that allow it to capture new • Loan growth outlook looks promising businesses and new clientele. We expect FY18F dividend yield to continue to be high at 7% p.a., driven by decent earnings • Asset quality continued to improve growth, despite a lower dividend payout. • Dividend payout to decline, but yield likely to remain high Where we differ. Market underestimated growth for KKP. We • Maintain BUY with higher TP of Bt92.00 believe, with KKP’s recently developed internal models,

potential growth from its commercial banking and capital market businesses could trump what the market has expected. Price Relative We now expect KKP’s earnings to grow 7.8% in FY18F, driven Bt Relative Index by robust loan growth and ROE expansion. 86.6 211 191 76.6 171 66.6 151 Potential catalysts. Stronger-than-expected fee income from 56.6 131 46.6 111 capital market business. Should capital market conditions 36.6 91 26.6 71 improve, KKP’s operating performance will improve accordingly. Jul-14 Jul-15 Jul-16 Jul-17 Jul-18

Kiatnakin Bank (LHS) Relative SET (RHS) Besides, any sizeable (IB) deal could also act as a catalyst for KKP’s share price performance. Forecasts and Valuation FY Dec (Btm) 2016A 2017A 2018F 2019F Pre-prov. Profit 8,803 7,719 9,386 10,323 Valuation: Net Profit 5,547 5,737 6,182 6,564 We maintain BUY on KKP with a new TP of Bt92.00. Our TP is Net Pft (Pre Ex.) 5,547 5,737 6,182 6,564 based on the Gordon Growth Model and implies 1.7x FY18F Net Pft Gth (Pre-ex) (%) 67.2 3.4 7.8 6.2 BV. At the current share price, KKP offers a total potential EPS (Bt) 6.55 6.78 7.30 7.75 EPS Pre Ex. (Bt) 6.55 6.78 7.30 7.75 return of 34% (27% capital gain and 7% dividend yield). EPS Gth Pre Ex (%) 67 4 8 6 Diluted EPS (Bt) 6.55 6.78 7.30 7.75 Key Risks to Our View: PE Pre Ex. (X) 11.1 10.7 9.9 9.4 Too slow an economic recovery could lead to further asset- Net DPS (Bt) 6.02 5.00 5.00 5.00 Div Yield (%) 8.3 6.9 6.9 6.9 quality deterioration, which would then lead to higher-than- ROAE Pre Ex. (%) 14.2 14.1 14.4 14.4 expected credit cost and disappointing earnings. ROAE (%) 14.2 14.1 14.4 14.4 ROA (%) 2.4 2.3 2.2 2.1 At A Glance BV Per Share (Bt) 47.6 48.8 52.6 55.3 Issued Capital (m shrs) 847 P/Book Value (x) 1.5 1.5 1.4 1.3 Mkt. Cap (Btm/US$m) 61,389 / 1,848 Earnings Rev (%): 2 2 Major Shareholders (%) Consensus EPS (Bt): 7.23 7.69 Thai NVDR 9.95 Other Broker Recs: B: 11 S: 4 H: 5 Credit Suisse AG, Hong Kong Branch 8.46 Chase Nominees Limited 6.74 Source of all data on this page: Company, DBSVTH, Bloomberg Finance Free Float (%) 68.68 L.P. 3m Avg. Daily Val (US$m) 8.0 ICB Industry : Financials /

ed: CK / sa: CW, TP Company Guide Kiatnakin Bank

WHAT’S NEW Promising growth prospect

Loan growth outlook looks promising. KKP’s loan portfolio expanded 10.2% YTD in 1H18, hitting the bank’s 10% full- Unlike other banks, KKP’s credit cost in FY18F is likely to be year loan growth target for 2018. higher than in FY17’s because i) there will be provisions set Hire purchase (HP) loans continued to grow (+2.8% YTD), aside for new businesses to be offered in 2018, and ii) special driven mainly by used-car HP and car-quick-cash products. mention loans (SM) declined significantly in 2017 and thus The used-car segment (used cars + car-quick-cash) accounted gave back the provisions previously set, reducing the net for 60% of total HP loans at end-2Q18, up from 58% at end- provisions set in FY17. 1Q18 and 56% at end-2017. Of the total loans, HP 2018 targets maintained. Both capital market and financial accounted for 50%, vs. 54% at end-2017; the proportion market businesses should perform better in FY18. KKP should go down further, given that other loans would grow maintains its targets to grow its loan portfolio by 10% (vs. better than HP. 9% in 2017), but with a lower loan spread, i.e. 4.8-5.0% (vs. Other retail loans grew a strong 24% YTD. These include 5.2% in 2017), as it expects to see more growth from lower- personal loans (+7.8%), micro SME (a.k.a. SME Car 3x) yield loans. Note that there were huge NPL resolutions that (+21.4%), and housing loans (+33.2%). Such growth was had resulted in an extraordinary high yield and high spread in attributed mainly to the bank’s new distribution channel 3Q17. (ADC). Given the better economic outlook and potential IB Real estate development loans (RE) expanded 18% YTD, (investment banking business) deals (that are ready to be thanks mainly to the bank’s strategy to grow its market share completed when the market condition is more favourable) in in the top-tier real estate developer market, instead of lower- the pipeline, its capital market business should also perform tier one. well in 2018. Besides, SAM (special asset management business) is a wild card, as normally, this business performs Corporate loans grew strongly 39% YTD and now constitute well when economy picks up. 10% of the total loans (vs. 8% at end-2017). Previously, corporate loans at KKP were short term and volatile, as they Dividend payout to decline, but yield likely to remain high. came mainly from bridging loans or M&A-related deals. Recall that KKP's high dividend payouts for its FY16 and FY17 However, its new corporate lending now was longer term and performance were part of the bank's capital restructuring more stable. plan, i.e. maintaining Tier 1 ratio at around 13-14%, and that has helped boost its ROE during the past several quarters. Loan growth outlook for all those segments remains Similarly, the payout ratio for FY18 performance will depend promising in 2H18, and we now expect KKP’s loan growth to on potential loan growth (i.e. its need for capital) in FY18- come in at 15% in FY18F. 19F. Given its ROE of 14.5% in 1H18, loan growth of c.15% Asset quality continued to improve. NPL ratio has continued in FY18F, and preferred CAR and Tier 1 ratios at 17% and 13- to decline. It was 4.5% at end-2Q18, declining from 5.0% at 14%, respectively, we believe KKP’s dividend payout will be end-2017 and 5.6% at end-2016. This was thanks mainly to lower than FY17’s, but we expect the absolute amount to be the decline in NPLs from RE. RE-NPL ratio was 17.5% at end- maintained at Bt5.00/share, implying a dividend yield of 7% 2Q18, vs. 21.4% at end-2017.This was thanks also to the p.a. bank’s strategic shift of RE lending towards upper-tier listed Maintain BUY with higher TP of Bt92.00. We raise our FY18F RE developers; however, yields would be lower, in line with earnings by 2% to largely reflect our higher loan growth the reduced risks. assumption of 15% (from 10% previously), lower NIM of The bank targets to further reduce its NPL ratio to below 4.3% (from 4.5%) to reflect a larger mix of low-yield 4.5% by the end of 2018 but has guided for a still high 100- corporate, RE, and mortgage loans, and higher cost-to- 120bps credit cost (including loss from sales of repossessed income ratio of 49% (from 47%) to reflect higher-than- cars but excluding general provision) (vs. 80bps in 2017 and expected cost-to-income ratio in 1H18. Our new TP is based 118bps in 1H18). Management has guided that FY18F credit on the Gordon Growth Model and implies 1.7x FY18F BV. cost should be at the lower-bound of the bank’s guidance, KKP is a high dividend-yield play, with potentially strong and thus 2H18 credit cost should be lower than 1H18’s. growth from both banking and capital market businesses. At the current share price, KKP offers a total potential return of

34% (27% capital gain and 7% dividend yield).

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Company Guide Kiatnakin Bank

Margin Trends Bt m 12,000 5.3%

10,000 5.1% CRITICAL DATA POINTS TO WATCH 8,000 4.9%

4.7% Critical Factors 6,000 4.5% FY18F loan spread will depend on loan mix. KKP’s funding costs still 4,000 have room to fall further, given the increasing proportion of CASA 2,000 4.3% 0 4.1% deposits and the upcoming maturity of high-rate deposits (to re-price at 2015A 2016A 2017A 2018F 2019F lower rates). On the yield side, the potential change in portfolio mix Net Interest Income Net Interest Income Margin towards used-car HP and retail non-HP loans, such as personal loans and SME Car 3x, could yield a higher average asset yield for KKP. However, Gross Loan & Growth should the bank grow lower-yield loans (i.e. corporate, RE, mortgage) Bt m more than high-yield loans, average asset yield could go lower. 20% 18% 200,000 16% 14% Better loan growth outlook in 2018. Like other small banks, KKP’s loan 150,000 12% portfolio comprises mostly HP (50%), and, similarly, its total loan portfolio 10% 100,000 8% has contracted for the past three years. However, in 2017, other retail 6% 50,000 4% loans, corporate loans, and Lombard loans have continued to expand 2% strongly and thus helping to expand the total loan portfolio. In 2018, KKP 0 0% 2015A 2016A 2017A 2018F 2019F targets to grow (high-yield high-growth) used-car HP and other retail Gross Loan (LHS) Gross Loan Growth (%) (YoY) (RHS) non-HP loans, and this should help support its total loan growth, on top of the better loan growth outlook for other segments, i.e. corporate and Customer Deposit & Growth RE, following expectations of a more sustainable economic recovery. Bt m 160,000 30% 25% 140,000 20% Non-interest income to improve with the economy and to grow with 120,000 15% 100,000 10% loans. Fee and non-interest income, mainly from its securities and asset- 80,000 5% management businesses, should improve with the economy and capital 60,000 0% -5% 40,000 market sentiment, as well as loans. -10% 20,000 -15% 0 -20% Cost-to-income ratio to stay in the high-40s in 2018. Cost-to-income 2015A 2016A 2017A 2018F 2019F ratios are likely to stay high (expected at 49%), due to the ongoing Customer Deposits (LHS) Customer Deposits Growth (%) (YoY) (RHS) expenses, i.e. increasing staff, variable commissions, etc., to grow its retail loans. Loan-to-Deposit Ratio Trend Bt bn Credit cost to stay in the 100bps (plus or minus) range in 2018. Given 242,183 173% that KKP has recently shifted towards used-car HP and other retail non- 222,183 163% HP loans, we may see NPLs increases from these (new) segments; 202,183 however, this should be well anticipated by KKP and in line with its 182,183 153% 162,183 expected risk-adjusted returns. With that, we believe its credit cost should 143% remain in the 100bps (plus or minus) range, while its coverage ratio 142,183 133% should remain above 100% going forward. 122,183 102,183 123% 2015A 2016A 2017A 2018F 2019F Loans Deposit Loan-to-Deposit Ratio (RHS)

Cost & Income Structure Bt m 51% 20,000 51% 50% 15,000 50% 49% 49% 10,000 48% 48% 5,000 47% 47% 46% 0 46% 2015A 2016A 2017A 2018F 2019F

Net Interest Income Non-interest Income Cost-to-income Ratio

Source: Company, DBSVTH

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Company Guide Kiatnakin Bank

Asset Quality Balance Sheet: 7.0%

NPL passed peak. KKP believes its NPL cycle already passed the peak. Of 6.0% the bank's NPL outstanding, around 47% derived from real estate (RE) 5.0% loans (i.e. loans to property developers), which have a collateral value of 4.0%

1.8x. As such, there is potential upside from RE NPL resolution if KKP 3.0% eventually forecloses and sells these assets. However, management has 2.0% guided for potential rising NPLs from used-car HP loans, until the ratio 1.0% reaches an optimal (risk-adjusted return) target. 0.0% 2015A 2016A 2017A 2018F 2019F Loan portfolio shifting towards used-car HP and other retail non-HP NPL Ratio Provision Charge-Off Rate loans. KKP’s loan portfolio has shifted towards used-car HP and other retail loans, i.e. personal loans, mortgages, and SME Car3x. Now, its loan Capitalisation (%) portfolio comprises 50% HP, 13% other retail non-HP (i.e. micro-SME 19.0% (SME Car3x), housing, and personal loans), 12% SME, 12% RE, 10% 18.0% corporate, and 3% Lombard loans. 17.0% 16.0% Capital ratio remains strong. Its CAR, CET 1, and Tier 1 capital ratios are 15.0% well above the minimum requirements set by the at 14.0% 10.375%, 6.375%, and 7.875%, respectively. Its strong capital position 13.0% should provide sufficient cushion for the expansion of loans and high 12.0% 2015A 2016A 2017A 2018F 2019F dividend payments. Tier-1 CAR Total CAR ROE (%) Share Price Drivers: 14.0%

Capital market business. Any news regarding sizeable deals on the 12.0% capital market side could act as a catalyst for KKP’s share price. 10.0%

8.0% Key Risks: Slow economic recovery. Too slow an economic recovery could lead to 6.0% further asset-quality deterioration, particularly in RE and SME portfolios, 4.0% which would then lead to higher-than-expected credit cost and 2.0% disappointing earnings. 0.0% 2015A 2016A 2017A 2018F 2019F

Company Background Kiatnakin Phatra Financial Group is a merger of a commercial bank Forward PE Band (x) (x) operated by Kiatnakin Bank Plc., with extensive experience of over 40 13.3 years, and a capital market business operated by Phatra Capital Plc. and 12.3 +2sd: 12.4x Phatra Securities Plc., leading companies in the securities brokerage 11.3 +1sd: 10.5x business in Thailand, with total assets of Bt255bn (as of March 31, 2014). 10.3 9.3 Kiatnakin Phatra Financial Group was listed on the Stock Exchange of 8.3 Avg: 8.6x

Thailand (SET) as "KKP". Kiatnakin Phatra Financial Group fully operates 7.3 -1sd: 6.7x businesses in financial and capital markets, focusing on expertise and a 6.3 5.3 wide range of services covering all needs of customers, including -2sd: 4.8x 4.3 individuals, businesses, and domestic and transnational institutions. Jul-14 Jul-15 Jul-16 Jul-17 Jul-18

PB Band (x)

2.0 (x)

1.8 +2sd: 1.71x 1.6

1.4 +1sd: 1.42x

1.2 Avg: 1.13x 1.0

0.8 -1sd: 0.84x

0.6 -2sd: 0.55x 0.4 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18

Source: Company, DBSVTH

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Company Guide Kiatnakin Bank

Key Assumptions FY Dec 2015A 2016A 2017A 2018F 2019F

Gross Loans Growth (3.7) (0.9) 8.9 15.8 9.0 Customer Deposits Growth (21.1) 5.4 20.9 14.0 8.2 Yld. On Earnings Assets 6.7 6.9 6.4 6.2 6.1 Avg Cost Of Funds 3.0 2.5 2.3 2.3 2.3

Income Statement (Btm) FY Dec 2015A 2016A 2017A 2018F 2019F

Net Interest Income 9,449 10,433 10,628 11,234 12,427 Non-Interest Income 5,228 6,268 5,460 7,030 7,815 Operating Income 14,676 16,701 16,089 18,265 20,242 Operating Expenses (7,441) (7,898) (8,369) (8,879) (9,919) Pre-provision Profit 7,235 8,803 7,719 9,386 10,323 Provisions (3,208) (2,313) (763) (1,903) (2,102) Associates 0.0 0.0 0.0 0.0 0.0 Exceptionals 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 4,027 6,490 6,956 7,483 8,221 Taxation (602) (879) (1,190) (1,286) (1,644) Minority Interests (108) (64.4) (29.2) (14.2) (13.0) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 3,317 5,547 5,737 6,182 6,564 Net Profit bef Except 3,317 5,547 5,737 6,182 6,564 Growth (%) Net Interest Income Gth 5.9 10.4 1.9 5.7 10.6 Net Profit Gth 40.4 67.2 3.4 7.8 6.2 Margins, Costs & Efficiency (%) Spread 3.8 4.3 4.2 3.9 3.9 Net Interest Margin 4.3 4.8 4.6 4.3 4.3 Cost-to-Income Ratio 47.8 47.1 50.3 49.0 49.0 Business Mix (%) Net Int. Inc / Opg Inc. 64.4 62.5 66.1 61.5 61.4 Non-Int. Inc / Opg inc. 35.6 37.5 33.9 38.5 38.6 Fee Inc / Opg Income 23.7 22.2 25.2 25.3 25.1 Oth Non-Int Inc/Opg Inc 12.0 15.3 8.7 13.2 13.5 Profitability (%) ROAE Pre Ex. 8.9 14.2 14.1 14.4 14.4 ROAE 8.9 14.2 14.1 14.4 14.4 ROA Pre Ex. 1.4 2.4 2.3 2.2 2.1 ROA 1.4 2.4 2.3 2.2 2.1 Source: Company, DBSVTH

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Company Guide Kiatnakin Bank

Quarterly / Interim Income Statement (Btm) FY Dec 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018

Net Interest Income 2,648 2,777 2,658 2,646 2,750 Non-Interest Income 1,257 1,480 1,417 1,703 1,679 Operating Income 3,905 4,256 4,074 4,349 4,429 Operating Expenses (2,067) (2,086) (2,399) (2,071) (2,160) Pre-Provision Profit 1,839 2,171 1,675 2,279 2,269 Provisions (456) (75.5) (65.1) (434) (489) Associates 0.0 0.0 0.0 0.0 0.0 Exceptionals 0.0 0.0 0.0 0.0 0.0 Pretax Profit 1,383 2,095 1,610 1,845 1,781 Taxation (177) (373) (303) (327) (227) Minority Interests (20.5) 0.57 (2.2) (4.9) (3.1) Net Profit 1,185 1,723 1,305 1,513 1,551

Growth (%) Net Interest Income Gth 4.0 4.9 (4.3) (0.4) 3.9 Net Profit Gth (22.2) 45.4 (24.3) 16.0 2.5

Balance Sheet (Btm) FY Dec 2015A 2016A 2017A 2018F 2019F

Cash/Bank Balance 1,032 1,167 1,425 1,281 1,499 Government Securities 0.0 0.0 0.0 0.0 0.0 Inter Bank Assets 9,801 11,484 11,511 19,627 21,456 Total Net Loans & Advs. 169,356 166,311 182,511 212,216 231,382 Investment 24,033 31,770 36,367 36,215 36,215 Associates 0.0 0.0 0.0 0.0 0.0 Fixed Assets 1,892 2,092 2,744 2,826 2,826 Goodwill 0.0 0.0 0.0 0.0 0.0 Other Assets 30,030 20,952 24,778 26,760 26,760 Total Assets 236,144 233,776 259,335 298,925 320,138

Customer Deposits 104,327 109,923 132,878 151,450 163,934 Inter Bank Deposits 9,209 8,360 8,290 9,784 10,590 Debts/Borrowings 72,066 61,482 62,304 73,314 78,896 Others 12,386 13,495 14,315 19,653 19,653 Minorities 227 219 216 214 227 Shareholders' Funds 37,929 40,298 41,332 44,511 46,838 Total Liab& S/H’s Funds 236,144 233,776 259,335 298,925 320,138

Source: Company, DBSVTH

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Company Guide Kiatnakin Bank

Financial Stability Measures (%) FY Dec 2015A 2016A 2017A 2018F 2019F

Balance Sheet Structure Loan-to-Deposit Ratio 162.3 151.3 137.4 140.1 141.1 Net Loans / Total Assets 71.7 71.1 70.4 71.0 72.3 Investment / Total Assets 10.2 13.6 14.0 12.1 11.3 Cust . Dep./Int. Bear. Liab. 59.6 63.0 67.0 66.0 66.0 Interbank Dep / Int. Bear. 5.3 4.8 4.2 4.3 4.3 Asset Quality NPL / Total Gross Loans 5.8 5.4 5.0 4.6 4.6 NPL / Total Assets 4.4 4.3 3.8 3.6 3.2 Loan Loss Reserve Coverage 91.7 110.0 109.6 112.4 112.1 Provision Charge-Off Rate 1.8 1.3 0.4 0.9 0.9 Capital Strength Total CAR 16.5 19.0 17.7 15.6 15.2 Tier-1 CAR 14.6 15.6 14.6 12.9 12.7

Source: Company, DBSVTH

Target Price & Ratings History

87.93 Bt 12-mth Date of Closing S.No. T arget Rating Report Price Price 82.93 1: 25 Jul 17 68.25 78.00 BUY 2: 06 Oct 17 70.50 78.00 BUY 77.93 3: 24 Oct 17 74.25 78.00 BUY

4: 27 Oct 17 75.75 78.00 BUY 5: 07 Nov 17 75.50 88.00 BUY

72.93 6: 06 Dec 17 75.25 88.00 BUY

7: 08 Jan 18 81.50 88.00 BUY 8: 22 Jan 18 83.50 88.00 BUY 67.93 9: 24 Jan 18 83.50 88.00 BUY 10: 31 Jan 18 81.75 88.00 BUY 11: 10 Apr 18 72.75 88.00 BUY 62.93 12: 24 Apr 18 74.50 88.00 BUY Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 13: 09 Jul 18 69.75 88.00 BUY 14: 23 Jul 18 72.00 88.00 BUY Note : Share price and Target price are adjusted for corporate actions.

Source: DBSVTH Analyst: Thaninee SATIRAREUNGCHAI, CFA

THAI-CAC Certified Corporate Governance CG Rating (as of Oct 2017)

THAI-CAC is Companies participating in Thailand's Private Sector Score Description Collective Action Coalition Against Corruption programme (Thai Declared Companies that have declared their intention to join CAC CAC) under Thai Institute of Directors (as of May 2018) are Certified Companies certified by CAC. categorised into: 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 80-89 Very Good practices of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), 70-79 Good disclosure and transparency (20%), role of stakeholders (20%), 60-69 Satisfactory equitable treatment of shareholders (10%) and rights of shareholders (15%). The IOD then assigns numbers of logos to 50-59 Pass each company based on their scoring as follows: <50 No logo given N/A

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Company Guide Kiatnakin Bank

DBSVTH recommendations are based an 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 catalysts within this time frame) Share price appreciation + dividends

Completed Date: 26 Jul 2018 06:19:48 (THA) Dissemination Date: 26 Jul 2018 06:23:20 (THA)

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

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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.

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(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.

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Company Guide Kiatnakin Bank

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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 Kiatnakin Bank recommended in this report as of 29 Jun 2018. 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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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. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”). DBS holds Australian Financial Services Licence no. 475946.

DBSVS is 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. DBSVS is regulated by the Monetary Authority of Singapore under the laws of Singapore, 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.

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

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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 PO Box 506538, 3rd Floor, International Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Financial Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for Centre professional clients (as defined in the 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 defined Emirates 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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Company Guide Kiatnakin Bank

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS Bank (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 65 6878 8888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 65 65353 418 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] Participant of the Stock Exchange of Hong Kong e-mail: [email protected] Company Regn. No. 196800306E

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

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