October 31, 2019

ASEAN Economics

Disruption Watch #7: ’s Digital Revolution

Thailand’s Digitalization: Falling Short Analysts Thailand’s internet economy is rising, growing from $6bn in 2015 to $16bn in Lee Ju Ye 2019. The government introduced ‘Thailand 4.0’ in 2016 to revolutionize (65) 6231 5844 industries through digitalization. However, Thailand lags behind regional peers [email protected] in digital adoption and 5G development, being the only ASEAN-6 country falling Chua Hak Bin under the Digital Evolution’s Index “Watch Out” zone (low state of

(65) 6231 5830 digitalization and low momentum). Online travel is the largest component, [email protected] while e-commerce, online media and ride-hailing are growing strongly. Thailand has yet to produce a unicorn (start-up valued more than $1bn). Funding in the tech sector is the lowest among the ASEAN-6 countries. Challenges include the lack of human capital in the tech sector and a

ECONOMICS burdensome tax system. E-Commerce and Digital Payments Still at Early Stage E-commerce penetration rate remains small at only 2% of total retail sales,

below most of ASEAN including (8.3%), (3.8%) and (2.8%). Online sales are growing at a double-digit rate, while same store sales growth for retail giants, including Robinson and , have been sluggish over the past 3 years. Lazada (owned by Alibaba) is the dominant

Regional player in Thailand’s e-commerce, resulting in surging consumer goods imports from China. E-commerce is lowering prices of consumer goods such as clothes, footwear and furniture. The e-commerce tax bill requiring foreign online platforms to collect VAT for sales in Thailand is still pending approval from the new government. Social commerce (via Facebook, Line) is an important aspect, accounting for 20% of total e-commerce transactions. The government’s launch of PromptPay in 2017 is driving the push towards cashless payments. Ride Hailing & Home Sharing: ‘Illegal’ But Flourishing Thailand is the only ASEAN-6 economy yet to legalize ride hailing, but Grab and Go-Jek (through affiliate GET) are thriving. The ride hailing and food delivery

market size has more than tripled to $1.3bn in 2019 from $0.4bn in 2015. The new government is expected to legalize the industry by March 2020, which could solidify the players’ positions. Incumbents have invested in and partnered with Grab (Kasikorn Bank, Central Group) and GET (Siam Commercial Bank) to widen their customer base through these platforms. Home sharing is also gaining popularity as Chinese tourists shift from group to independent travel. Disruption to the hotel industry is minimal at this stage, with Airbnb guests accounting for only 3.3% of total visitors (or 1.2mn) in 2017. Hard ‘Pexit’ (Postal Exit) Avoided & VC Funding Slows The latest Universal Postal Union vote in Sep, triggered by the US announcement in Oct-18 to exit the union, resulted in a ‘compromise’ option. The US will remain in the union on two conditions: 1) US can apply self- declared rates (on a reciprocal basis) starting July 2020; and 2) contribute $40mn annually to the union’s fund. Estimates of a potential postal hike ranges from +125% to +600%, which could raise delivery costs significantly. Venture financing in Asia remained weak in 3Q19 with the absence of mega deals above $1bn and a slowing China. Top deals globally in 3Q19 included US’ Juul ($785mn), China’s NetEase Cloud Music ($700mn) and Didi Chuxing ($600mn).

THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH SEE PAGE 23 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Economics Research

Thailand’s Digital Revolution

In Disruption Watch #7, we focus on [1] Thailand’s digital economy (e- commerce, ride hailing, home sharing); [2] the outcome of the Universal Postal Union vote in Sep; and [3] the slump in Asia’s venture capital funding in the third quarter.

Thailand’s internet economy is growing at a healthy clip, rising from just $6bn in 2015 to $16bn in 2019 (+29% CAGR). It is expected to hit $50bn by 2025, based on the e-Conomy SEA 2019 report by Google, Temasek and Bain & Company. The online travel sector ($7bn in 2019) is the dominant component as Thailand has the biggest tourism economy in ASEAN (see Fig 1). The star performer is however the e-commerce sector ($5bn in 2019), which grew by an astounding +54% CAGR over the past 4 years. Online media (+39%) is growing strongly given the high social media connection. The ride hailing sector (which includes transport & food delivery) is still small at $1bn as of 2019, but is expected to grow by 5 times the size by 2025.

Figure 1: Thailand’s Internet Economy Growing Rapidly, with Fastest Growth in E-Commerce

Thailand Internet Economy (GMV, $bn)

$ bn 2015 2019 2025

25 '15-'19: +54% '15-'19: +17% '15-'25: +35% '15-'25: +18% 20 20 18

15 '15-'19: +39% '15-'19: +36% '15-'25: +24% '15-'25: +30% 10 7 7 5 5 3.9 5 3 0.9 0.8 0.4 1 0 E-commerce Online Travel Online Media Ride Hailing

Source: e-Conomy SEA 2019 Report (Google, Temasek, Bain & Company)

The vision of a digital economy has been taking shape over the past few years. In 2016, the military government introduced a new economic initiative ‘Thailand 4.0’, to revolutionize industries through digitalization and lift the country from the middle-income trap in 5 years. Digitalization would bring the economy a step forward from the current era of ‘Thailand 3.0’ (see Fig 2), which is driven by heavy industries such as oil & gas, petrochemicals and steel (largely for exports).

Ten industries were identified to propel Thailand to developed nation status, which were divided into two categories – the First S-Curve and New S-Curve (see Fig 3). The S-Curve refers to 5 existing industry groups which have high potential and able to develop by adding value through advanced technologies. The 5 New S-Curve industries – which include the digital economy - are expected to be significant long-term growth drivers. Two more industries – defense technology and educational technology - were added to the list in 2018. Besides that, major projects such as True Digital Park (co-working and office zone for tech sector, hosting development labs such as Google Academy) and Thailand Cyberport (a business park and incubator) are part of the ‘Thailand 4.0’ initiative.

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Figure 2: New Economic Model – Stepping Up to ‘Thailand 4.0’ Figure 3: Ten Target Industries – First S-Curve and New S- Curve

Source: Board of Investment Source: Board of Investment

Thailand still lags behind in digital adoption compared to its regional peers, despite the government’s ambitions. Based on the Digital Evolution Index (DEI) 20171, Thailand falls under the “Watch Out” zone, which refers to countries with low state of digitalization and low momentum (see Table 1). In comparison, most of the ASEAN-6 countries including Malaysia, Indonesia, and , are in the “Break Out” zone with rapid progress in digitalization (see Fig 4).

Adoption of digitalization by SMEs is still low. Accounting for 42% of GDP and 79% of employment, SMEs are still underequipped with digitalization skills. Thailand ranked 11th out of 14 countries in Asia Pacific in terms of digital readiness, based on a recent study by Cisco Systems2. Top challenges cited by the SMEs were lack of talent (18%), lack of insight into operations or consumer data (18%), and lack of a robust IT platform (10%).

Table 1: Digital Evolution Index: Thailand in “Watch Out” Category Category Description Asian Countries Highly digitally advanced and exhibit high momentum. Leaders in driving innovation, Stand Out Singapore, Hong Kong, Japan building on their existing advantages in efficient and effective ways. Enjoy a high state of digital advancement while Stall Out South Korea exhibiting slowing momentum Malaysia, Indonesia, Low-scoring in their current states of Break Out Philippines, Vietnam, India, digitalization but are evolving rapidly Bangladesh Watch Out Low state of digitalization and low momentum Thailand, Pakistan

Source: Harvard Business Review, Digital Evolution Index 2017, The Fletcher School at Tufts University and Mastercard

1 The DEI is derived from about 170 indicators across 4 broad categories, which include supply conditions (infrastructure), demand conditions (how digitally engaged consumers are), institutional environment (IP rights), and innovation and change. 2 Post, “Thai SME digital readiness third in region”, 8 May 2019. October 31, 2019 3

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Figure 4: Thailand Lags Behind ASEAN Peers, Falling in the ‘Watch Out’ Category

masterc Source: Harvard Business Review, Digital Evolution Index 2017, The Fletcher School at Tufts University and Mastercard

Thailand is one of the laggards in 5G development in the region, partly due to the telecom firms’ reluctance to invest and develop 5G given expectations that demand for the service will be insufficient to justify the expensive infrastructure (estimated at Bt100bn or US$3bn). In April 2019, the government issued an order granting loan extensions to the three major telecom operators (Advanced Info Service, True Corp and DTAC) in exchange for joining the bid for the 5G spectrum auction, with winners obligated to begin 5G development by 20203. The debut auction of 5G spectrum will take place in Feb 2020, and 5G adoption is expected only in late 20214 (see Thailand Telcos – Plus 10MHz? Won’t Do Much!, 21 Jun 2019). Meanwhile, Singapore and Malaysia plan to have 5G running in 2020.

5G adoption will depend on the country’s digital readiness, an area that requires some catching up. Thailand ranked just 40th place (out of 63) in the 2019 IMD world digital competitiveness ranking, which assesses factors such an economy’s ability to develop new digital innovations and preparedness for fresh developments. This places Thailand far behind other Asian countries including Singapore (#2) and Malaysia (#26) (see Table 2).

3 Nikkei Asian Review, “Thai telecoms remain wary of 5G despite promise of government aid”, 10 May 2019. 4 Bangkok Post, “Feb 16 data for 5G bids”, 31 Oct 2019. October 31, 2019 4

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Table 2: IMD World Digital Competitiveness Ranking for 2019 Rank Country Score Rank Country Score 1 US 100 13 Taiwan 90.19 2 Singapore 99.37 14 Australia 88.90 3 Sweden 96.07 … …

4 Denmark 95.23 22 China 84.29 5 Switzerland 94.64 23 Japan 82.78 6 Netherlands 94.26 26 Malaysia 82.39 7 Finland 93.73 … …

8 Hong Kong 93.69 40 Thailand 68.43 9 Norway 93.67 55 Philippines 59.44 10 South Korea 91.30 56 Indonesia 58.01

Note: Total of 63 economies were evaluated for their capacity to adopt and explore digital technologies as a key driver for economic transformation in business, government and wider society. Source: IMD World Competitiveness Center

One of the major challenges is the lack of human capital. Tech graduates are insufficient, with a recent survey by the Eastern Economic Corridor (EEC) Office finding that the demand for workers across the EEC will exceed 475,000 people in the next 5 years 5 . While 60% of these jobs can be filled by low-skilled but qualified vocational workers, the remaining 40% will require high-skilled workers with at least a bachelor’s or postgraduate degree (see Table 3).

Table 3: Eastern Economic Corridor Office Survey Results on Employment Demand Between 2018 and 2023 Master's Vocational Bachelor's Total % of total and PhD A) EEC Target Industries

Digital 49,000 67,000 116,000 24%

Smart Electronics 23,000 29,000 5,700 58,000 12% Next-Generation Automotives 44,000 9,100 91 53,000 11% Robotics 21,000 14,000 1,300 37,000 8% Aerospace Engineering 3,700 29,000 32,000 7%

High-end Medical Tourism 15,000 1,700 16,920 4%

Medical Hub 5,000 5,000 1,000 11,000 2% B) Infrastructure Industries

Logistics 65,000 43,000 108,000 23%

Rail Transit System 20,000 3,000 400 24,000 5% Maritime 3,500 11,000 14,000 3%

Total 475,000 100%

Source: Eastern Economic Corridor Office, Bangkok Post

Foreign talent is scarce despite generous visa allowances for foreign tech workers. The Smart Visa programme was introduced on 1 Feb 2018, aiming to attract high-skilled experts, senior managers and investors to work or invest in tech firms to help develop the 10 targeted industries. Smart visa holders can work and live in Thailand up to a maximum of 4 years, and are exempt from a work permit requirement from the Labour Ministry. However, interest has been lackluster with only 37 applications as of Sep 20186.

Another bottleneck is the tax system. The World Bank estimates that the average business in Thailand needs as long as 229 hours a year to file taxes, only shorter than Vietnam (498 hours) in ASEAN (see Fig 5). In contrast, Singapore takes an average of only 64 hours per year to file taxes.

5 Bangkok Post, “Lack of skilled labour threatens EEC”, 20 May 2019. 6 Bangkok Post, “Smart visa conditions revised for experts”, 12 Nov 2018. October 31, 2019 5

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Figure 5: Time Required to File Tax Table 4: ASEAN’s Unicorns – No Entry from Thailand and Malaysia Valuation Time (Hours per year) to File Tax Firm Country Sector (USD bn) 600 Grab 11.0 Singapore Ride-hailing, payments 498 Go-Jek 10.0 Indonesia Ride-hailing, payments 500 Tokopedia 7.0 Indonesia E-commerce Gaming, payments, e- 400 Sea 4.9 Singapore commerce 300 275 Lazada 3.2 Singapore E-commerce 229 208 221 Traveloka 2.0 Indonesia Online travel 181 188 188 200 142 Razer 2.0 Singapore Gaming hardware VNG 1.6 Vietnam Gaming, social media 100 64 35 Bukalapak >1 Indonesia E-commerce Revolution 0 >1 Philippines Real estate Precrafted Bigo >1 Singapore Social video streaming app Payments, rewards and OVO >1 Indonesia financial services platform

Source: World Bank Source: Compiled by Maybank Kim Eng

Funding for Thailand’s tech sector is the lowest in the region. The internet economy has raised only $480mn of funds between 2016 and 1H19, based on numbers compiled by the e-Conomy SEA 2019 Report (see Table 5). This is partly due to the absence of homegrown unicorns (start-ups valued at more than $1bn), unlike Singapore and Indonesia which have the strongest tech funding that are mostly channelled to the unicorns such as Grab, Lazada, Go-Jek and Tokopedia (see Table 4). Funding for Thailand’s startups are drying up with only $50mn raised in the first half of 2019, far below the $200mn peak recorded in 2017.

Table 5: Funding in ASEAN’s Internet Economy (in US$bn) Singapore Indonesia Malaysia Vietnam Philippines Thailand

2016 3.1 1.2 0.13 0.16 0.06 0.10 2017 5.7 3.0 0.29 0.14 0.05 0.20 2018 9.1 3.8 0.40 0.35 0.31 0.13 1H18 4.8 1.8 0.20 0.18 0.04 0.05 1H19 5.3 1.8 0.14 0.26 0.13 0.05 Total (2016 23.2 9.8 0.96 0.91 0.55 0.48 to 1H19)

Source: e-Conomy SEA 2019 Report (Google, Temasek, Bain & Company)

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Riding the E-Commerce Wave

It is early days for Thailand’s e-commerce, which is expanding at a healthy double-digit pace and has plenty of room left to grow. Internet sales account for only 2% of total retail sales in 2018, lower than the rest of ASEAN-5 except for the Philippines (see Fig 6). E-commerce is the key driver of Thailand’s digital economy, surging by +54% CAGR between 2015 and 2019, the third fastest pace in ASEAN after Indonesia (+88%) and Vietnam (+81%) (see Fig 7).

Social commerce – which consists of all digital transactions made via social channels such as Facebook, Instagram and LINE – is an important aspect of e- commerce, accounting for 20% of total e-commerce transactions. With 74% of the population on social media, Thailand is among the world’s largest social commerce market (see Fig 8). Consumers purchasing directly through social media accounted for 51% of online shoppers, significantly higher than the global average (16%), India (32%), Malaysia (31%) and China (27%), based on a PWC survey7. As a result, cash on delivery or bank transfers are still the preferred payment methods, especially outside of Bangkok (see Fig 9).

Figure 6: Thailand’s Internet Sales Penetration Low at Only Figure 7: Thailand’s E-Commerce Market Size Grew to $5bn in 2% of Total Retail Sales 2019, from Just $0.9bn in 2015

% of total Indonesia Malaysia Philippines retail sales Singapore Thailand 9% SG: 8.3% 8%

7%

6%

5%

4% MY: 3.8%

3% ID: 2.8%

2% TH: 2.0% PH: 1.4% 1%

0% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Source: Euromonitor Source: e-Conomy SEA 2019 Report (Google, Temasek, Bain & Company)

Figure 8: Nearly Three Quarters of Thailand’s Population are Figure 9: Bank Transfer and Cash on Delivery the Most Active Social Media Users Preferred Method of Payment When Purchasing Online

Active Social Media User Penetration in Asia (Jan 2019) How Thais Prefer to Pay on E-commerce Website

Taiwan 89 Bank Transfer 38 62 South Korea 85 Singapore 79 Hong Kong 78 Cash on Delivery 33 67 Malaysia 78 Thailand 74 China 71 Credit/Debit Card 59 41 Philippines 71 Vietnam 64 Japan 61 Other 57 43 Indonesia 56 Cambodia 51 Myanmar 39 % 0 20 40 60 80 100 Bangkok Metropolitan Non-Bangkok 0 20 40 60 80 100

Source: Statista, Hootsuite, We Are Social Source: ecommerceIQ E-Marketplace Survey Thailand 2018

7 PricewaterhouseCoopers, Total Retail 2016 Report, Feb 2016. October 31, 2019 7

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Dominant e-commerce players are the regional leaders Lazada (owned by Alibaba) and Shopee (under Sea Group backed by Tencent), while local players such as Tarad.com still lag behind (see Appendix for description of major e-commerce players). The Electronics Transactions Development Agency (ETDA) has announced plans to invest Bt1bn (US$33mn) to build a local e- commerce platform to compete with global players such as Alibaba and JD.com. The agency will be working with the two largest local players – Tarad.com and LNWshop.com – to build a national e-commerce platform8.

Although the e-commerce penetration rate is small, incumbents are feeling the competition and adapting to the change by working jointly with the new players or launching their own online stores. Same store sales growth for major consumer names such as Robinson, Siam Makro and CP Group have been relatively sluggish compared to overall retail sales index growth for the past three years (see Fig 10, Thailand Consumer Discretionary - Readying for Delisting (ROBINS TB) & Recovery On (MAKRO TB), 13 Aug 2019). The largest retail conglomerate, the Central Group, acquired Zalora’s Thai business in April 2016 and rebranded it as Looksi the following year. Central also collaborated with JD.com in Sep 2018 to launch online shopping portal JD Central. More recently, Central invested $200mn to acquire a stake in Grab in Jan 2019 to connect its offline shops and restaurants with online consumers9.

Figure 10: Retail Sales Index Growing Faster than Same Store Figure 11: Internet or Mail Order Sales Booming Since 2015 Sales Since 2017 Because of E-Commerce

%YoY Retail Sales Index vs. Same Store Sales Growth Thailand %YoY, 3MMA Retail Sales Index: Mail Order or Internet %YoY, 3MMA 20 Retail Sales Index ROBINS MAKRO CPALL 1,200 Retail Sales Index (RHS) 60

15 1,000 50

10 800 40

600 30 5 400 20 0 200 10 -5 0 0

-10 -200 -10 '13 '14 '15 '16 '17 '18 '19 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Source: CEIC, BoT Source: CEIC, Bloomberg

The e-commerce boom is lifting consumer goods imports and lowering prices of consumer items. Share of consumer goods imports has risen from 8.2% in 2011 to 12% in 8M19, reflecting the internet sales boom in 2015, according to data by BoT (see Figures 11 & 12). E-commerce is also lowering prices of consumer goods as price transparency thanks to digitalization creates more intensified competition for both online and offline retailers. Prices of consumer goods that are popular online such as clothes, footwear, and furniture have been trending lower than core inflation over the past 5 years, partly due to the “Amazon effect” (see Fig 13).

8 Bangkok Post, “ETDA building local e-commerce platform for B2C market”, 24 Apr 2019. 9 Nikkei Asian Review, “Thailand’s Central Group ties up with Grab for retail offerings”, 31 Jan 2019. October 31, 2019 8

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Figure 12: Share of Consumer Goods Imports Rising Over the Figure 13: E-Commerce Lowering Prices of Consumer Goods Past Decade, Fuelled by the E-Commerce Boom Over the Past 5 Years

THB bn Imports: Consumer Goods 900 % of total imports (RHS) 13 12.0 12.0 11.5 12 800 11.3

10.7 11 700

9.4 10 600 8.8 8M19 8.5 9 8.2 500 8

400 7

300 6 '11 '12 '13 '14 '15 '16 '17 '18 '19

Source: CEIC Source: CEIC, BoT

Chinese products are becoming more common on Thailand’s e-commerce platforms. Based on statistics by Priceza, an e-commerce price comparison website, 80% of products sold on the three major e-commerce platforms are from overseas while only 20% are domestic 10 . Lazada, the dominant platform, practices direct imports from China and Hong Kong – meaning that it connects customers to its Alibaba sellers in China and manages stock for them (in its warehouse on their behalf) to sell via its platform. This has resulted in a strong surge in imports of consumer products from China, especially products that are popular online such as clothes and apparel (+14% 5YCAGR between 2013 and 2018) and footwear (+11%) (see Table 6 & Fig 14).

Table 6: Total Amount Spent on Consumer E-Commerce by Figure 14: Thailand’s Imports of Consumer Products from Category (2018) China Rose Strongly in the Past 5 Years Thailand E-Commerce by Category USD mn %YoY Total Consumer Goods 3,757 +23 Electronics & Physical Media 1,043 +24 Fashion & Beauty 908 +17 Furniture & Appliances 660 +22 Toys, DIY & Hobbies 575 +25 Food & Personal Care 571 +30 Total Consumer Services 4,343 +27 Travel (including Accomodation) 4,140 +28 Video Games 158 +12 Digital Music 45 +4.6

Source: We are Social, Hootsuite Source: CEIC

Local merchants are also benefitting from e-commerce platforms to export to China. The Commerce Ministry launched the Thai Rice Flagship Store on Tmall.com in April 2018 with Alibaba, creating an e-commerce channel for rice and durian products to be sold to Chinese consumers. JD Central also signed an agreement with the International Trade Promotion Department to connect Thai SMEs to Chinese consumers through an online store launched in June 2018, selling Thai products popular in China including beauty, food & beverages, home living and healthcare products.

Government is pushing for regulations to tax e-commerce but progress has been slow and delayed due to the formation of the new government. Currently, any domestic B2C and B2B sellers of goods and services with annual sales exceeding Bt1.8mn (US$0.56mn) are required to pay 10% in VAT, but this

10 Bangkok Post, “E-commerce rivalry intensifies”, 1 Apr 2019. October 31, 2019 9

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does not cover foreign operators. The Revenue Department has been pushing for a draft bill requiring digital platform operators providing services (including online games, sticker downloads, online advertisements, digital content and online hotel bookings) that generate annual sales exceeding Bt1.8mn to register for VAT payment and pay sales tax 11 . In Aug 2019, the Finance Ministry announced that it will seek parliamentary approval this year for the tax bill and aims to collect between Bt3bn to Bt4bn a year12.

There are plans to tap on banks to assist in collecting VAT for digital transactions. A draft bill introduced last year aims to improve tax collection efficiency by requiring financial institutions and digital finance service providers to report transactions of customer accounts that have more than 3,000 deposits and more than 200 money transfer transactions a year with a total value of at least Bt2mn (US$0.62mn)13.

Despite having a high digital connection, electronic payments adoption remains low. Around 76% of B2C sales are still paid for by cash-on-delivery, based on estimates by regional e-commerce services provider aCommerce14. The government has been pushing for more digital payments by launching PromptPay in early 2017, a money transfer and payment scheme that prompted banks to scrap digital transaction fees. PromptPay registrants amounted to 49 million as of July 2019. Transactions via mobile banking have surged strongly over the past two years (see Figures 15 & 16).

Figure 15: Mobile Banking Transactions Volume Far Larger Figure 16: Mobile Banking Transactions Value Rising Rapidly than Internet Banking Since 2015 Thailand Transactions Volume Thailand Transactions Value Unit mn THB bn Internet Banking Mobile Banking Internet Banking Mobile Banking 1,000 9,000 Jan-17: Jan-17: PromptPay 900 PromptPay 8,000 launched 800 launched 7,000 Thousands 700 6,000 600 5,000 500 4,000 400 300 3,000 200 2,000 100 1,000 0 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Source: CEIC Source: CEIC

11 Bangkok Post, “Excise Department studies online streaming service levy”, 26 Jun 2019. 12 Bangkok Post, “Finance Ministry plans e-commerce tax next year”, 26 Aug 2019. 13 Bangkok Post, “E-commerce bill gets second hearing”, 6 Sep 2018. 14 Financial Times, “Foreign players carve up Thai ecommerce market”, 13 Jun 2019. October 31, 2019 10

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Ride Hailing & Home Sharing: Thriving Despite ‘Illegal’ Status

Thailand is the only ASEAN-6 country yet to legalize ride hailing players Grab and Go-Jek (which operates through its affiliate GET). The Transport Ministry of the new government, clinched by the Bhumjaithai Party, announced its plan to legalize ride-hailing services by March 2020 as promised during its election campaign. According to the drafted guidelines, private vehicles will be required to be registered and equipped with a GPS system, and drivers will need a public driver’s license15.

Despite their “illegal” status, the two players have flourished since entering the market (Grab in 2014 and GET in Feb 2019), with the online transport & food delivery market size more than tripling from $0.4bn in 2015 to $1.3bn in 2019 (see Fig 17). Other ride hailing players include Taxi OK (established by the transport ministry in Jan 2018) and Line Taxi (launched by messaging app operator Line in Mar 2018). The online food delivery market – dominated by Grab Food, Line Man and Foodpanda - is growing alongside the ride hailing players. GET, which launched food delivery services together with ride hailing, expects online food delivery to account for 10% of the total food & beverages market, up from the current 2% to 5%16.

Figure 17: Ride Hailing Services Still Small in Thailand $ bn ASEAN Online Transport & Food Delivery Market Size 6.0 5.7

5.0

4.0 +57% 2015

2.9 2019 3.0 +37% 2.0 +36% 1.3 1.1 +31% +35% 0.9 +57% 0.9 1.0 0.8 0.8 0.4 0.2 0.3 0.3 0.0 Indonesia Singapore Thailand Vietnam Malaysia Philippines

Source: e-Conomy SEA 2019 Report (Google, Temasek, Bain & Company)

Banks are cooperating with ride hailing players to offer financial services. Siam Commercial Bank took a stake in Go-Jek in its series F funding round ($3bn) in Jul-19 and announced a partnership with Go-Jek’s Thai affiliate GET, allowing the bank to provide financial services to drivers and merchants on GET. Kasikorn Bank invested $50mn in Grab in Dec-18 to launch the GrabPay electronic wallet, allowing the bank to use Grab’s data on merchants and drivers to formulate loan products and minimize non-performing loans17.

Ride hailing players have been able to expand their offerings in the region despite their widening net losses as funding remained healthy. Funding rounds for Grab and Go-Jek were among the top venture deals in 2018 (see Table 7). In Thailand, Grab’s revenues rose significantly to Bt508mn in 2017 from just

15 Reuters, “Thailand to legalize ride-hailing services by early 2020: ministry”, 6 Sep 2019. 16 Bangkok Post, “Get eyes 1m users by year-end”, 28 Aug 2019. 17 Reuters, “Thailand’s Kasikornbank invests $50 million in ride-hailing firm Grab”, 8 Nov 2018. October 31, 2019 11

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Bt1.6mn in 2014, but its loss has also widened to near Bt985mn from Bt106mn over the same period (see Fig 18).

Table 7: List of Top Venture Capital Funding Globally in 2018 Deal Size Firm Country Industry Period (US$mn) Ant Financial China 14,000 Financial software 2Q18 Juul USA 12,800 Electronics (B2C) 4Q18 Weltmeister China 3,176 Transportation (electric car) 2Q18 Pinduoduo China 3,000 Internet retail 2Q18 ByteDance China 3,000 Information services (B2C) 4Q18 Grab Singapore 2,850 Transportation (Ride hailing) 4Q18 Grab Singapore 2,500 Transportation (Ride hailing) 1Q18 Faraday Future US 2,000 Transportation 2Q18 Grab Singapore 2,000 Transportation (Ride hailing) 3Q18 Manbang Group China 1,900 Transportation 2Q18 Lyft USA 1,700 Transportation (Ride hailing) 1Q18 Faraday Future USA 1,500 Business/productivity software 1Q18 Go-Jek Indonesia 1,500 Transportation (Ride hailing) 1Q18 Epic Games US 1,250 Entertainment software 4Q18 Uber USA 1,200 Transportation (Ride hailing) 1Q18 Tokopedia Indonesia 1,100 Platform software 4Q18

Source: KPMG Venture Pulse Report

Figure 18: Grab Thailand’s Revenue Performance (2013-17) Figure 19: Thailand Among Top Countries Most Willing to Participate in Sharing Economy

THB mn Revenue Net income (Loss) Top 10 Countries Most Likely to Share/Rent from Others

600 508 China 98%

400 Indonesia 87%

200 104 Slovenia 86% 51 0.3 1.6 0 Philippines 85% -8.2 -200 -106 Thailand 85% Bulgaria 79% -400 Mexico 79% -600 -506 -516 Brazil 78% -800 India 78% -1,000 -985 Hong Kong 78% -1,200 2013 2014 2015 2016 2017 50% 60% 70% 80% 90% 100%

Source: Business Online, Bangkok Post Source: Nielsen Research

Thailand’s regulations on the home sharing industry remain ambiguous, but platforms such as Airbnb are gaining popularity. While the 2004 Hotel Act prohibits landlords from providing short-term rentals for a period of less than 30 days without a hotel license, the 2008 Ministerial Regulation contains clauses that exclude short-term rental properties from being considered as a hotel18. A court ruling in Hua Hin district (of Prachuap Khiri Khan province) concluded that people who rent out their rooms via Airbnb on a daily or weekly basis were acting illegally 19 . Yet, home sharing platforms are growing in popularity and Thai residents are among the most willing in the world to share or rent assets from others, based on a survey by Nielsen Research (see Fig 19).

There are signs that the regulatory environment for home-sharing is turning more lenient. Airbnb formed a partnership with the Ministry of Interior’s Department of Local Administration in Jul 2018, to work together to train local provincial officials on hospitality, hosting and compliance standards. In May 2019, Airbnb announced a partnership with the Government Savings Bank (GSB), a state-owned bank, to help promote Thai hospitality entrepreneurs, starting with

18 Specifically guesthouses or properties with four rooms or less and/or can accommodate no more than 20 guests. 19 Bangkok Post, “Airbnb bookings illegal, court declares”, 18 May 2018. October 31, 2019 12

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local homestay owners 20 . GSB will provide better funding support through flexible-interest rate loans and installment plans, while Airbnb will provide training and connect homestay owners to its platform.

Chinese tourists, who account for the largest source of visitor arrivals, are increasingly shifting from groups to independent travel and staying in private accommodation or unregistered hotels. The first wave of outbound Chinese tourists travelled in groups, but younger, tech-savvy tourists classified as “Chinese FITs” (free, independent travelers) are increasingly planning their own trips (see ASEAN Economics: China Tourists – Divergent Tides, 18 Oct 2019). Self- guided tours are preferred by 44% of Chinese travelers in the 20-24 age group, while the share drops to 27% for travelers aged 45 and above, based on McKinsey research21 (see Fig 20). In Thailand, Chinese FITs accounted for almost 60% of Chinese tourists in 201622.

Figure 20: Young Chinese Tourists Favour Self-Guided/Semi Self-Guided Tours

Note: Self-guided travellers buy their own flights and hotels and arrange all their activities. Semiself- guided travellers buy their own flights and hotels but hire a local tour guide to arrange and lead activities. Source: McKinsey 2017 China Outbound Traveller Survey

Disruption to the hotel industry is minimal at this stage. Airbnb hosted around 1.2m guests in 201723, which accounted for only 3.3% of total visitor arrivals. Hotel room occupancy rates have risen over the years from an average of 65.1% in 2015 to 71.2% in 2018 (see Fig 21). On the other hand, Airbnb occupancy rates remain low, ranging between 45% in Phuket to 63% in Bangkok (see Table 8). A recent study by consultancy firm JLL found that visitors to Thailand prefer traditional hotels to home-sharing accommodations, as reflected in the higher number of hotel guest reviews. The study also concluded that affordability of hotels helped maintain their competitiveness, with the average price per night for hotels lower than Airbnb across three markets (Phuket, Bangkok and Chiang Mai)24.

20 The Nation, “Airbnb and GSB launch partnership to support local homestays”, 17 May 2019. 21 McKinsey & Company, “Chinese Tourists: Dispelling the Myths”, Sep 2018. 22 Financial Times, “Thailand cracks down on ‘zero-dollar’ tour groups”, 9 Jan 2017. 23 Bangkok Post, “Thai Airbnb hosts serve 1.2M”, 17 Feb 2018. 24 Bangkok Post, “Visitors favour hotels over Airbnb, consultancy finds”, 10 Jun 2019. October 31, 2019 13

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Figure 21: Hotel Room Occupancy Rates Improving Over the Table 8: Airbnb Statistics (as of 31 Oct 2019) – Occupancy Years Rates Remain Low

Bangkok Phuket Chiang Mai

Number of Active 17,159 11,654 7,003 Rentals

Average Daily Rate Bt1,532 Bt3,426 Bt1,564

Occupancy Rate 63% 45% 61%

Revenue Bt21.3k Bt33.9k Bt22.2k

Source: CEIC Source: AirDNA

Table 9: Airbnb Statistics in Asia (for period Sep 2016 to Aug 2017) Inbound guest Median host Host payout Average guest Country Unique hosts arrivals earnings (US$ mn) stay length Japan 5,388,400 26,300 $9,900 556.3 3.3 China 2,521,400 61,100 $600 137.0 2.3 South Korea 1,584,400 13,400 $3,300 108.1 2.6 Taiwan 1,187,900 12,200 $1,900 67.8 2.4 Malaysia 1,157,800 11,700 $1,200 42.0 2.3 Thailand 1,030,500 14,200 $2,100 97.7 4.1 Indonesia 812,100 11,200 $2,100 84.6 3.7 Philippines 756,500 11,200 $1,700 39.2 2.9 Hong Kong 403,400 5,100 $3,500 49.9 3.5 Singapore 324,600 4,100 $3,900 51.2 4.1 Vietnam 300,200 5,900 $1,000 16.2 3.0

Source: Airbnb25

Incumbent hotels are also launching more flexible versions of hotels to attract a similar group of travelers who prefer the conveniences offered by home sharing platforms. For instance, Centara Hotels & Resorts under the Central Group launched its first Cosi brand hotel on Samui Island in Dec 2017 in response to travellers who mostly do their own bookings online and budget prices. The “lifestyle” hotel has a modern décor to target young travelers, for instance having social hubs or co-working space instead of traditional lobby spaces. They also offer easy mobile check-in and a 24/7 Grab & Go option for snacks or drinks. More Cosi hotels are in the pipeline, starting with Pattaya (280 rooms), Chiang Mai (140 rooms) and Bangkok over the next 3 -5 years (see Thailand Hotels – Short-term disruptions (CENTEL TB), 11 Jul 2019).

25 Airbnb, “Airbnb & Apec: Closing tourism gaps with healthy travel”, Sep 2017. October 31, 2019 14

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Universal Postal Union: Hard ‘Pexit’ (Postal Exit) Avoided

“Today manufacturers in countries as small as Cambodia and as large as China pay less to send small parcels from their countries to New York than US manufacturers do to ship packages from Los Angeles to the Big Apple. This puts American manufacturers and workers at a significant competitive disadvantage and forces the US Postal Service to subsidise a system that weakens America’s manufacturing base.”

Peter Navarro, President Trump’s trade advisor, in a Financial Times article, 11 Sep 2019

“Today what I witnessed is a historical moment where we averted possible exit of one of our member countries. I can tell you it was very tense. Once a country declares their rate, exporting countries will have to factor that cost; it means that cost will be transferred to the person sending that item ... When you are in a country and you buy items overseas, the end-customer will definitely have to pay a higher price.”

Bishar Hussein, UPU director-general, speaking after phased deal was announced, 25 Sep 2019

The Universal Postal Union recently held its third extraordinary congress to address the US’ threat to exit the union. Earlier in Oct 2018, the US had announced that it was starting the one-year withdrawal process from the UPU, and adopt self-declared rates for terminal dues26 by Jan 2020 (see Disruption Watch #6: Are Banks Immune, 13 May 2019 and Disruption Watch #4: Trade War Spreads to E-Commerce, 29 Nov 2018). This was due to US’ perception that the system created an unfair cost advantage for US firms as developing countries such as China enjoyed low postal rates. The US Postal Service had spent $300mn to $500mn annually to subside the cost of delivering imported mails27.

Member countries were given three options to vote during the 24-26 Sep congress. Option B would have allowed all 192 members of the union to impose self-declared rates immediately, which would end the terminal due systems and allow countries to have complete control of the rates they charge for the domestic component of international postal transactions (see Table 10).

Table 10: Three Options Up for Vote in UPU Extraordinary Figure 22: US Air Cargo Has Been Surging in Past Three Years Congress (24 to 25 Sep 2019) on the Back of the E-Commerce Boom

Option Description Details

Union will implement changes to the Terminal Dues system that were agreed upon A Status quo at the 2016 Instanbul Congress (minor adjustments to terminal dues rates in 2020). Preferred option Allows all member countries to charge a self- by US, ideally B declared rate on inbound packages, while implemented by not exceeding domestic retail rates. Jan 2020 Allow countries to charge a self-declared Compromise rate, while mitigating its impact by C option introducing a phase-in period, and ensuring rates do not exceed 70% of domestic tariffs.

Source: Compiled by Maybank Kim Eng Source: CEIC

26 Terminal dues are payments between designated postal operators for the domestic transport, sorting and delivery of inbound cross-letter post items in the destination country. 27 Reuters, “U.N. postal union clinches deal to keep U.S. in club”, 26 Sep 2019. October 31, 2019 15

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After the earlier options were rejected, “Option V” was passed at the congress. Under the new deal, countries with more than 75k metric tonnes in post imported annually – which includes the US – will be allowed to apply their self-declared new rates starting 1 July 2020. This system will be applied on a reciprocal basis (countries can charge self-declared rates on the US). Other countries will be allowed to move toward setting their own rates starting Jan 2021. In exchange, the US and any other country that decides to self-declare rates will contribute $40mn annually to the union’s “voluntary fund” for initiatives such as security and the organization’s pension.

There is no guidance yet on how much the US will raise rates, but it could be a significant upward revision. New rates will initially be capped at 70% of domestic rates, with the option to increase it by +1% every year up to 80%. A FedEx lobbyist had suggested US terminal dues should increase by 125% to 180%, while other industry estimates have suggested an increase up to 600%28.

The new deal would mean rising costs for both US importers and US firms or consumers delivering outbound packages. According to US officials, the change may also cause more consumers to purchase from dollar and discount stores, and drive more shipping volume to express carriers such as FedEx, UPS and DHL.

Other countries that may follow the US move and implement self-declared rates in the future. Around 30 other countries support the US position to self- declare rates, but no other country has formally announced plans to leave the UPU. Sweden, Denmark, Finland, Germany, Ireland, Iceland and Norway, where market share of Chinese e-commerce sites have grown substantially, may choose to self-declare rates. Brazil and Canada, have also voiced their support for US efforts to improve the system.

Most ASEAN countries likely voted for the status quo option, as most fall under the ‘Developing Countries’ category (see Table 11). Malaysia supported Option A (status quo), with Pos Malaysia stating that it was considering a de- regulation to cushion the potential hike in postal and parcel rates 29 . Pos Malaysia’s last rates revision was nearly a decade ago in 2010 when standard mail (weighing under 20g) rates were raised to RM0.60 (from RM0.30)30. SingPost, in its analyst briefing in early Aug (prior to the UPU vote) stated that the firm could see an opportunity even if US were to leave the UPU as Singapore has many bilateral agreements with many countries. US’ exit could even benefit SingPost temporarily as other posts may have to ‘piggyback off’ SingPost’s bilateral agreements while negotiating their own bilateral agreements.

Table 11: Universal Postal Union Country Classification – Most of ASEAN Under “Developing Countries” Category Group 1.1 Group 1.2 Group 2 Group 3 Group 4 Group 5 Australia Hong Kong Brunei Darussalam Argentina Algeria Afghanistan Canada Singapore Croatia Brazil Bolivia Bangladesh Denmark Kuwait Cyprus Chile Cameroon Bhutan Finland Qatar Czech Republic China Colombia Cambodia France United Arab Emirates Republic of Korea Kazakhstan Ghana Ethiopia Germany Macao Libya India Laos

Italy Poland Malaysia Indonesia Madagascar

Japan Saudi Arabia Mexico Mongolia Myanmar

Norway Oman Pakistan Nepal

Switzerland Russia Philippines Tanzania

United Kingdom South Africa Sri Lanka

United States Thailand Uzbekistan

Turkey Vietnam

Note: List of countries is not exhaustive. Source: US Postal Service “International Terminal Dues White Paper”

28 CNBC, “Global postal group reaches deal to avoid US withdrawal”, 25 Sep 2019. 29 New Straits Times, “Pos Malaysia is working to ensure no major hike in postal rates”, 25 Sep 2019. 30 New Straits Times, “Pos Malaysia weighing options on rate hikes”, 14 Oct 2019. October 31, 2019 16

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Venture Funding Sluggish in 3Q19

Venture financing in Asia remained weak in 3Q19 as concerns around the US- China trade war and China’s slowdown weighed on confidence in the region’s tech companies (see Fig 23). Despite the overall weakness, the transportation sector attracted funds in China, with major deals in 3Q including the $600mn investment by Toyota into Didi Chuxing (#3 largest deal globally in 3Q), a $530mn funding round by CHI Automotive (#6), and $500mn for Byton (#7).

Figure 23: Venture Financing in Asia Slumps to a 2-Year Low in 1Q19, Mainly Due to China, With a Weak Recovery in 2Q and 3Q

Source: KPMG Venture Pulse Q3 2019

Top deals in the third quarter of 2019 were a diverse mix of mega deals around the world (see Table 12). The largest funding was the $785mn for Juul in the US, followed by the $700mn funding for NetEase Cloud Music in China. A few deals were done in Europe including for FlixMobility (#4), Bablyon Health (#5) and N26 (#10). The slump in Asia’s venture financing from 2Q levels is reflected by the absence of deals exceeding $1bn in Asia in 3Q19. In 2Q, mega deals in Asia included OYO Rooms in India ($1.1bn) and JD Health in China ($1bn).

Table 12: Largest Venture Capital Funding in 3Q 2019 vs. 2Q2019 Top Ten Deals in 3Q19 Top Ten Deals in 2Q19 Deal size Deal size Rank Company Country Industry Stage Rank Company Country Industry Stage (US$ mn) (US$ mn) Late-stage Application 1 JUUL US 785 Consumer durables 1 OYO Rooms India 1,100 Series E VC software NetEase Cloud Entertainment Late-stage 2 China 700 Series B2 2 Rappi Colombia 1,000 Internet retail Music software VC Late-stage 3 Didi Chuxing China 600 Automotive Corporate 2 JD Health China 1,000 Platform software VC Late-stage 4 FlixMobility Germany 564 Automotive Series F 2 Flexport US 1,000 Logistics VC Application 5 Babylon Health UK 550 Healthcare services Series C 5 DoorDash US 600 Series G software CHJ Application 6 China 530 Automotive Series C 6 Deliveroo UK 575 Series G Automotive software Application/workfl 7 Mission Lane US 500 Consumer finance Series A 7 UiPath US 568 Series D ow software Late-stage 7 Byton China 500 Automotive Series C 8 AUTO1 Group Germany 536 Automotive VC Aerospace & 9 Ola India 490 Application software Series J 8 SpaceX US 536 Series K defense 10 N26 Germany 470 Financial software Series D 10 SoFi US 500 Consumer finance Series H

Source: KPMG Venture Pulse

October 31, 2019 17

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Maybank KE Economics Disruption Watch Series:

Disruption Watch #6: Are Banks Immune?, 13 May 2019 Disruption Watch #5: The Battle for 5G, 25 Feb 2019 Disruption Watch #4: The Big Tech Backlash, 29 Nov 2018 Disruption Watch #3: War Games & Media Wars, 23 Aug 2018 Disruption Watch #2: Backlash & Consolidation, 3 May 2018 Episode I: Disruption Watch, 11 Feb 2018

Maybank KE Economics Thematic Research:

ASEAN Economics: China Tourists – Divergent Tides, 18 Oct 2019 ASEAN Economics: China’s Investment in ASEAN – Belt & Road and Supply Chain Shifts, 4 Oct 2019 ASEAN Economics: China’s Belt & Road: Retreating or Reawakening?, 8 Aug 2019 ASEAN Economics: Trade War - Uncovering Winners from Trade Diversion, 5 Jul 2019 ASEAN Economics: Trade War - ASEAN in the Crossfire, 17 Jun 2019 ASEAN Tourism: Blue Skies, But Keep Your Seatbelts Fastened, 7 May 2019 ASEAN Economics: CLMV – ASEAN’s Emerging Frontiers, 8 Apr 2019 Thailand Economics: Divided Parliament May Choke Future Projects & Investment, 26 Mar 2019 Singapore Economics: Post-Budget: Airport REIT an Option for Funding Infra?, 5 Mar 2019 ASEAN Economics: Election Cycles & Spending Booms, 15 Feb 2019 ASEAN Economics: China Tourists – Losing Altitude, 14 Jan 2019

October 31, 2019 18

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Table 13: Performance & Valuation Table EPS PBV (x) PE (X)

, 2019 , Name Ticker Mkt Cap Price Rating TP 18A 19E 20E 18A 19E 20E 18A 19E 20E Advanced Info Service ADVANC TB 23,403.9 238.000 Buy 272.0 3.6% 14.4% -1.1% 8.9 10.2 9.1 17.2 22.3 22.5

Robinson Public Company ROBINS TB 2,406.1 65.500 Sell 50.0 12.5% 9.2% 11.6% 3.9 3.4 3.2 23.8 24.2 21.7

Siam Makro MAKRO TB 5,080.2 32.000 Buy 45.9 1.0% 10.8% 12.7% 8.2 7.5 6.8 25.7 24.9 22.1 Total Access Communication DTAC TB 4,875.0 62.250 Sell 45.3 nm nm 14.1% 4.7 5.9 5.1 nm 25.5 22.4 TRUE Corp TRUE TB 5,573.3 5.050 Hold 4.8 1,239.2% -68.2% -10.6% 1.3 1.4 1.4 24.5 135.7 90.0

Source: Maybank Kim Eng

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Appendix

Figure 24: Key Tech Startups in Thailand

Source: Techsauce

Table 13: Major E-Commerce Players in Thailand WeLoveShopping Lazada Shopee 11Street Konvy Kaidee Tarad.com .com Business Model B2B2C B2B2C B2C B2C C2C C2C C2C Previously co- Operates under owned by the Originates from Singha Life, the Local firm, Belongs to True Under Sea Group Japanese e- Chinese internet South Korea as a lifestyle division previously known Corporation Owned by and backed by commerce company Lazada subsidiary of SK of Thailand's as Dealfish and (telecomms Chinese Tencent player Rakuten, Telecom largest beverage later OLX provider) now backed by manufacturer TCC Group Average Visitors per 63.6m 15m 1.2m 6m 12.7m 6m 4.5m Month Cross-Border Yes Yes N/A N/A No No No Capability Yes, especially Direct Import from China and Yes N/A N/A Yes N/A Yes Hong Kong Credit/debit Bank transfer, COD, credit/debit Credit/debit card, Bank transfer, COD, Credit/debit card, Paypal, card, counter service, credit/debit card, credit/debit, card, True Payment Method Counter COD, Airpay, Line Bank transfer counter service, bank transfers, Money wallet, Service, Bank Bank pay, COD, Over mobile wallets, Rabbit line pay Counter transfer transfer the installment Serivce Counter

* Direct import means the company links to overseas suppliers (i.e. Lazada links to its Alibaba sellers in China) and manages stock for them (holds stock in its warehouse on their behalf) to sell via its platform. ^ Cross-border capable means the company fulfils items directly from overseas suppliers when a purchase is made on the site (only for applicable countries and vendors). For example, a merchant in Indonesia can sell directly to a customer in Malaysia if it opts in to sell on international platforms. Source: Australian Government Austrade

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Figure 25: Distribution of Airbnb Homes in Bangkok (as of Oct 2019)

Note: Map display limited to 2,000 properties. Purple dots refer to entire homes while blue dots refer to private rooms. Source: AirDNA

January 31, 2019 21

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Research Offices

MACRO REGIONAL EQUITIES SINGAPORE THAILAND

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January 31, 2019 22

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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluct uate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as t echnical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. 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Since this assessment is only the assessment result as of the date a ppearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and com pleteness of the assessment result. US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. 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UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regula ted, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility fo r its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that f or accurate guidance recipients should consult with their own independent tax advisers. DISCLOSURES

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Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to he rein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 31 October 2019, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: As of 31 October 2019, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

India: As of 31 October 2019, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring anal yst or their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report. In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits from the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to soph isticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial an d political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any invest or interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between 0% to 10% in the next 12 months (excluding dividends) SELL Return is expected to be below 0% in the next 12 months (excluding dividends) Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

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 Malaysia  Singapore  London  New York Maybank Investment Bank Berhad Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Securities Maybank Kim Eng Securities USA (A Participating Organisation of Maybank Kim Eng Research Pte Ltd (London) Ltd Inc Bursa Malaysia Securities Berhad) 50 North Canal Road PNB House 400 Park Avenue, 11th Floor 33rd Floor, Menara Maybank, Singapore 059304 77 Queen Victoria Street New York, New York 10022, 100 Jalan Tun Perak, London EC4V 4AY, UK U.S.A. 50050 Kuala Lumpur Tel: (65) 6336 9090 Tel: (603) 2059 1888; Tel: (44) 20 7332 0221 Tel: (212) 688 8886 Fax: (603) 2078 4194 Fax: (44) 20 7332 0302 Fax: (212) 688 3500

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Indonesia London Iwan Atmadjaja Greg Smith [email protected] [email protected] (62) 21 8066 8555 Tel: (44) 207-332-0221

New York India James Lynch Sanjay Makhija [email protected] [email protected] Tel: (212) 688 8886 Tel: (91)-22-6623-2629

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