Anda di halaman 1dari 19

Thailand Industry Focus

Thailand Consumers
Refer to important disclosures at the end of this report

DBS Group Research . Equity 5 Jul 2018


Has domestic consumption really SET : 1,629.20
picked up? Analyst
Namida ARTISPONG +66 28577833
• Domestic consumption is improving albeit slowly and namidaa@th.dbs.com
unevenly
• Return to sales growth with margin expansion should
STOCK PICKS
be seen for retailers
12-mth
• Thailand tourism remains strong with overseas tourism Price Mkt Cap Target Price Performance (%)

in which Thai companies have exposure to improving Bt US$m Bt 3 mth 12 mth Rating

• We are still cautious on agri-food segment Central Plaza Hotel 45.75 1,863 57.00 (7.6) 16.6 BUY
CP ALL 76.50 20,726 95.00 (11.6) 20.0 BUY
• Our top picks are CPALL, HMPRO, AOT, and CENTEL Home Products
Center 14.00 5,553 17.50 (1.4) 46.6 BUY
Domestic consumption is improving but supported by
Airports of
only certain groups. Domestic consumer spending should Thailand 67.00 28,868 75.00 (2.2) 41.8 BUY
continue to grow in 2018, but this should be fuelled by only Source: DBSVTH, Bloomberg Finance L.P.
middle- to high-income earners. Low-income households still Closing price as of 4 Jul 2018
face sluggish spending due to the high household debt level
and slow recovery in farm income and employment. This Central Plaza Hotel : CENTEL owns and operates hotels and restaurant
chains.
implies an uneven improvement in domestic consumption.
CP ALL : The Company's main business is the operation of
Retail sector: Return to sales growth with margin convenience store retail outlets under the trademark of "7-Eleven" in
expansion. On top of a pick-up in sales growth this year from Thailand.
improving SSSG and store expansion, the story of increasing Home Products Center : Operates a retail chain under “Home Pro”. It
operating margins should be similar to last year, driven by gross sells a complete line of products for renovation, decoration, and repair
of homes and buildings.
margin expansion and lower SG&A to sales. This should drive the
earnings growth of the retailers under our coverage to remain at Airports of Thailand : The national airport operator managing 6
international airports throughout Thailand, including Suvarnabhumi
a double-digit pace in FY18F. Airport in Bangkok.
Tourism sector: Strong Thailand tourism while overseas
tourism is recovering. Given the solid growth in tourism Thailand: Consumer confidence index
demand, hotel room rate hikes are expected, thus providing
higher operating leverage to the hotel operators. Meanwhile, 81
tourism activities in overseas markets like the Maldives and 80
Portugal in which companies under our coverage have exposure 79
78
to are improving.
77
Agri-food sector: Waiting for more meaningful margin 76
recovery. We expect core earnings of agri-food companies to 75
improve sequentially in the following quarters. Nevertheless, we 74
73
are waiting for a more meaningful margin recovery as more time
72
should be needed for the supply rationalisation to have an 71
impact on domestic meat prices and the price uptrend of key raw 70
materials will pose additional key risks to their profitability.
May-16

May-17

May-18
Nov-16

Nov-17
Aug-16

Aug-17
Feb-16

Feb-17

Feb-18

Our top picks are CPALL, HMPRO, AOT, and CENTEL. We like
CPALL and HMPRO for their solid earnings prospects and they
both have been the market leaders in their own sectors Source: UTCC, DBSVTH
respectively. In the tourism space, AOT remains our favourite pick
due to its positive long-term growth profile, while CENTEL is a
beneficiary of both strong tourism activities in Thailand and
rebound in tourism activities in the Maldives. However, we still
have cautious view on agri-food companies like CPF and TU, as
we are waiting for a more meaningful margin recovery.

ed: CK / sa: PY, CS


Industry Focus
Has domestic consumption really picked up?

Domestic economy: Improving domestic consumption; albeit slowly and unevenly

1Q18 was a good start to the year for GDP growth. months in a row, thus leading to sluggish consumption of
Thailand’s economy grew 4.8% y-o-y in 1Q18 which is a non-durable goods. This implies an uneven improvement in
five-year high (vs 4% in 4Q17), beating all economists’ domestic consumption. Therefore, businesses that are
estimates due to a rebound in farm production output, mainly dependent on low-income local consumers can be
strong exports, and a pick-up in private consumption. All impacted by the limited purchasing power. According to
sectors performed well in 1Q18 as exports rose 9.9% y-o-y Thailand’s labour force, 31.2% of the workers are in
while private consumption gained 3.6%, private investment agriculture industry, followed by wholesale and retail trade
grew 3.1%, and government investment increased 4%. The industry (16.8%), manufacturing industry (16.7%),
tourism sector also did well with the number of international accommodation and food services (7.2%), and construction
tourist arrivals and receipts from foreign tourists jumping by (6.2%). Nevertheless, the government has launched a
15.4% and 19%, respectively. Note that although the multitude of measures this year to support low-income
agricultural production index rose by 8.5%, the agricultural earners.
price index fell 12.3% which led to a contraction in nominal
farm income by 4.8% in the quarter. Thailand: Quarterly nominal farm income
20%
2018 GDP growth target has been revised up. Many
15%
economic houses have revised up Thailand’s 2018 GDP
10%
growth target for strong exports. The Finance Ministry
5%
forecasts the economy will grow by 4.2% in 2018 – the
fastest pace in five years – while the National Economic and 0%
Social Development Board (NESDB) estimates GDP growth in -5%
the range of 4.2-4.7% this year. The economic growth of -10%
more than 4% should be mainly supported by better -15%
external demand (global economic expansion) and -20%
improvement in public and private investments while the
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15

1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
4Q15

export and tourism sectors will also remain the main


economic growth drivers. Nominal farm income
Agricultural production index
In 2018, the Commerce Ministry targets export growth of Agricultural price index
8% (vs +9.9% last year), riding on expansion of the world
economy, especially its key trading partners like the US, Source: BOT, DBSVTH
Europe, Japan, and China. The shipments of industrial
products such as electronics and electrical appliances look
Thailand: Labour force structure
promising. However, stricter US trade policies are the key
risks for export forecasts. Continuous growth in exports
Transportation and
would lead to an increase in capacity utilisation and support storage, 3% Education, 3%
private investment going forward. Public
Other Non-
administration
and defence, Agricultural,
4% 11% Agriculture, 31%
Domestic consumption is improving but supported by only
certain groups. Domestic consumer spending should
continue to grow in 2018 but this should be fuelled by only Wholesale and
Manufacturing,
middle- to high-income earners. Decent growth in the retail trade, 17%
17%
consumption of durable goods (particularly led by Construction,
6%
automobiles) among high-income earners has been seen.
However, low-income households still face sluggish Accommodation
and food service
spending due to the high household debt level and slow activities, 7%
recovery in household income and employment. Nominal
farm income has been pressured by the decrease in Source: BOT, DBSVTH
agricultural product prices which have declined for ten

Page 2
Industry Focus
Has domestic consumption really picked up?

Government measures in 2018 to support purchasing power Consumer confidence index keeps climbing. Consumer
of low-income earners. These include three major schemes for confidence has continued to climb since the middle of last
this year – minimum wage hike, Welfare card project phase I, year, thanks to expectations of economic recovery and the
and Welfare card project phase II. upcoming elections. Nevertheless, confidence dipped in May
this year as consumers were concerned about rising oil prices,
- Minimum wage hike: The minimum wage has been slower-than-expected economic recovery, low commodity
increased by Bt5-22, which varies by provinces, to an prices, and the potential postponement of the national
average of Bt316 per day, which was effective from election.
1 April 2018. This policy was estimated to benefit
c.12% of the labour force (average hike of 3%). Thailand: Consumer confidence index
However, rising unemployment may not lift overall 81
purchasing power despite the minimum wage hike. 80
79
78
- Welfare card project phase I: For those who earn
77
Bt30,000 to Bt100,000 p.a. (6.1m people), Bt200 76
per month of allowance will be given through 75
welfare cards. Meanwhile, another group who earns 74
73
less than Bt30,000 p.a. (5.3m people) will receive 72
Bt300 per month. 71
70

May-16

May-17

May-18
Nov-16

Nov-17
Feb-16

Aug-16

Feb-17

Aug-17

Feb-18
- Welfare card project phase II: This is an additional
scheme to the first phase of the project. The low-
income earners will get an additional Bt100-200 per Source: UTCC, DBSVTH
month of allowance if they participate in job
training.

Page 3
Industry Focus
Has domestic consumption really picked up?

Retail sector: Resuming sales growth with margin expansion

Retailing sales forecast to grow at CAGR of 2.2% over Thailand: Forecasted sales growth in retailing by
2017-2022. According to Euromonitor, retailing sales value store-based vs non-store (%)
is forecast to increase at a five-year CAGR of 2.2% (2017- 6%

2022), supported by store-based retailing growth of 2% and 5%


non-store based retailing growth of 4.8%. Non-store
retailing sales growth should outpace that of store-based 4%

retailing, mainly because of Internet retailing – thanks to 3%


rising smartphone penetration, and improving logistics and
payment services. 2%

1%
Although internet retailing will continue to grow, store-
based retailing operations should still be sustained as most 0%
2018 2019 2020 2021 2022
consumers still prefer to feel and see the products before
Store-based retailing Non-store retailing Retailing
purchasing. In the meantime, many online players are also
starting to roll out their own physical retail stores. Digital Source: Euromonitor, DBSVTH
disruption may affect traditional retail business formats but
brick-and-mortar setups will still have a place in Thailand.
Improving SSSG led by big cities. Overall, we don’t expect
Store renovations, new products, and new store formats will
SSSG to rebound significantly but should be at least
be the key success factors for store-based retailers.
improving for most of the retailers this year. However, this
Eventually, the ability to adapt to changing consumer tastes
should be driven mostly by Bangkok, big provinces, and
will help sustain foot traffic.
tourist cities which have higher purchasing power, as the
domestic consumption rebound is still not broad-based.
The retailers under our coverage have developed their online
Many retailers’ SSSG in the upcountry are still in negative
operations but their online sales currently contribute to less
territory but of a lesser magnitude. For retailers under our
than 1% of total sales and such contribution will be
coverage, CPALL, HMPRO, and BEAUTY were able to deliver
expected to remain in single digits in the next three to five
positive SSSG in 1Q18. However, we see slower SSSG
years. We do not see online competition as a de-rating
recovery for casual-dining restaurants (MINT and CENTEL)
catalyst for Thai retailers.
and modern trade retailers (BJC) as competition remains very
aggressive. SSSG performance in 2H18 looks somewhat
Thailand: Forecasted sales value in retailing by store-
based vs non-store (Bt bn) challenging, in the absence of a low base effect.
4,500
Retailers: Bangkok vs upcountry revenue exposure
4,000
100%
3,500
90%
3,000
80% 40%
2,500 50% 50%
70% 56% 60% 64%
2,000
60% 76%
1,500
50%
1,000
40%
500
30% 60%
- 50% 50%
20% 44% 40%
2017 2018 2019 2020 2021 2022 36%
10% 24%
Store-based retailing Non-store retailing Retailing
0%
CPALL BEAUTY BJC HMPRO MAKRO MINT CENTEL
Source: Euromonitor, DBSVTH
Bangkok Upcountry

Source: Company, DBSVTH

Page 4
Industry Focus
Has domestic consumption really picked up?

Retailers: Quarterly SSSG performance introduced the new format of 3K/4K upgraded hypermarket
40.0% model to cater for changes in spending behaviour and
lifestyle. This model will feature 60% retail space and 40%
30.0%
rental space vs normal hypermarkets' 50%/50%. While
20.0%
most of the retailers’ new store formats tend to be in smaller
10.0% sizes, CPALL plans to open stores with bigger sizes and car
park facilities to accommodate those who drive as well.
0.0%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
-10.0% Retailers: Outlet expansion in Thailand
-20.0%
2018F Outlet expansion plan
CPALL At least 700 stores
-30.0% MAKRO 7 food service shops and 1 eco-plus store
HMPRO 1-2 HomePro stores and eight HomePro S stores
CPALL MAKRO HMPRO BIGC
BEAUTY 22 Beauty Buffet and 12 Beauty Cottage
BEAUTY CENTEL MINT
BJC 8 hypermarkets and 200 Mini BigC
Source: Company, DBSVTH MINT 100 outlets
CENTEL 65 outlets

Source: Company, DBSVTH


Retailers: Quarterly SSSG performance
SSSG 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
CPA LL 2.6% 5.0% 4.4% -0.4% 1.2% -1.0% 2.4% 5.9% 5.6% Private label has become another important strategy for
M A K RO 0.3% 5.0% 6.3% 3.9% 2.4% -1.4% 2.2% 2.1% 0.2%
retailers. As house-brand products yield higher margin,
HM PRO 3.0% 3.7% -0.6% -1.8% -2.5% -6.3% 2.8% 3.0% 3.0%
BIGC -2.9% -4.0% -22.6% -22.2% -20.0% -15.2% 9.2% 3.8% 0.3% retailers target to increase the proportion of own private
BEA UT Y 26.4% 23.3% 34.2% 9.2% 14.4% 20.8% 18.6% 25.9% 18.4% labels to enhance overall profitability. HMPRO’s house
CENT EL 0.2% 2.7% 0.1% -5.6% -1.3% -6.2% 1.9% 2.9% -0.6% brands accounted for 19.1% of total sales in FY17, 8-9%
M INT 0.9% 2.3% 3.0% -0.9% 1.3% -1.0% -2.5% -1.1% -1.8%
for CPALL, and 7% for BIGC.
Source: Company, DBSVTH
Too many opportunities to ignore in overseas markets.
Although Thailand still offers good organic growth
Retailers: 1Q18 SSSG performance opportunities, many retailers have looked at international
1Q18 Overall SSSG Bangkok Upcountry markets, especially in ASEAN to sustain their growth. We
CPALL 5.6% + + would expect sales from international markets to grow in
BEAUTY 18.4% + +
BJC 0.3% + -
the forecasted period. HMPRO has expanded outside of
HMPRO 3.0% + + Thailand, opening its first store in Malaysia in 2014, as
MAKRO 0.2% + - Malaysia presents geographic proximity benefits and has
MINT -1.8% - -
similar consumer spending behaviour. Currently, the
CENTEL -0.6% + -
company has six HomePro outlets in Malaysia. BEAUTY has
Source: Company, DBSVTH
also expanded to CLMV, the Philippines, Hong Kong,
Taiwan, Indonesia and China. Although CPALL cannot
Continuous store expansion with new formats. All of the expand its convenience stores into other markets due to the
retailers including quick-serviced restaurant operators restriction of its 7-Eleven licence to Thailand, its acquisition
continue to expand their stores this year. Thailand is a of MAKRO provides a platform to expand into other
developing country where there are many under-penetrated countries. Currently, MAKRO has ventured into Cambodia.
areas in many provinces with room for growth of modern- Meanwhile, BJC has a very meaningful presence in Vietnam
trade penetration. However, some may be a bit cautious on already.
rolling out large stores in provincial cities this year. On top of
this, retailers tend to launch new store formats, as well as Improving operating margins. On top of a pick-up in sales
new products and value-added services to attract consumers growth this year, operating margins should also improve and
given their increasing expectations for retail offerings. In thus drive earnings growth of the retailers under our
terms of new store format, HMPRO has launched the coverage (to remain at a double-digit pace in FY18F).
HomePro S store format in 2017 in which the store size is Companies’ specific factors are the key drivers for margins.
reduced from 6,000-7,000 sqm to 1,000-2,000 sqm with The story of increasing operating margins should be similar
the stores located in department stores. BJC has also

Page 5
Industry Focus
Has domestic consumption really picked up?

to last year, driven by gross margin expansion and lower Retailers: Sector core earnings to grow 17% y-o-y in
SG&A to sales. Higher gross profit margin is expected to be FY18F
supported by changing the product mix towards high- 3- y ear av erage
Core earnings 2017 2018F y - o- y 1Q18/F Y 18F
margin products and companies’ efforts to increase the sales 1Q/f ull y ear
proportion of house brands. Meanwhile, cost control efforts CPALL 19,908 22,725 14% 24% 24%
and higher operating leverage will lower SG&A to sales. We HMPRO 4,886 5,672 16% 22% 23%
expect core earnings of retailers under our coverage to BJ C 5,211 6,725 29% 20% 23%
increase by 16.9% y-o-y to Bt36.5bn in FY18F. 1Q18 BEAUTY 1,229 1,382 12% 20% 18%
earnings surged 17.5% y-o-y. These made up 22.6% of our T ot al 31,234 36,503 17% 23% 22%
full-year forecast.
Source: Company, DBSVTH
Retailers: Margins performance
50.0%
45.0% Our top picks are CPALL and HMPRO. We like both of them
40.0%
for their solid earnings prospects, being the market leaders
35.0%
in the convenient store and home improvement sectors
30.0%
25.0%
respectively.
20.0%
15.0% Top BUY: CPALL. Still a strong play for domestic retailers.
10.0% CPALL’s cash-and-carry business might be pressured by the
5.0% opening of new stores overseas, which will still contribute
0.0% losses to the group. However, we expect its convenient store
business to still be miles ahead of its competitors and
1Q16

1Q17

2Q16

2Q17

3Q16

3Q17

4Q16

4Q17

1Q17

1Q18

continue to do well with positive SSSG, with new products


CPALL MAKRO HMPRO BEAUTY BJC
and services to cater to customers’ changing needs. The
Source: Company, DBSVTH strong operations of CVS would lead to solid earnings
growth (FY18F earnings growth forecast of 16% y-o-y) for
the whole group. CPALL is now trading at 28x forward PE,
at its average level.
Retailers: Sector core earnings grew 18% y-o-y in
1Q18
Second BUY: HMPRO. Strong business strategy execution.
Core earnings 1Q17 4Q17 1Q18 y-o-y q-o-q HMPRO continues to dominate the home and garden
specialist retailing segment in Thailand, thanks to its strong
CPALL 4,765 5,525 5,417 14% -2%
business strategy execution in investment by striking a fine
HMPRO 1,046 1,526 1,248 19% -18% balance between growth and risk, coupled with its ability to
BJC 1,016 1,886 1,312 29% -30% anticipate and adjust to customers’ lifestyle changes.
BEAUTY 200 408 282 41% -31% HMPRO is focusing on the more profitable format for store
expansion this year. Despite the slowly improving domestic
Total 7,027 9,346 8,260 18% -12%
consumption, HMPRO is still expected to deliver decent
Source: Company, DBSVTH profit growth through profitability enhancement. Higher
operating efficiency and a larger sales mix of house brands
will strengthen its profitability.

Page 6
Industry Focus
Has domestic consumption really picked up?

Tourism sector: Strong Thailand tourism while overseas tourism is recovering

International tourist arrivals keep hitting record numbers. Thailand. The Tourism Authority of Thailand expects the
Thailand remains a strong and attractive destination for number of international tourists to Thailand to reach 37m in
tourist, drawing guests from a diverse range of countries. In 2018 (+4.5% y-o-y). From May 2018 onwards, we believe
5M18, total international tourist arrivals to Thailand grew the growth momentum of international arrivals to Thailand
12.6% y-o-y to 16.5 m. Overall, key feeder market arrivals may look weaker than in 4M18, as the Chinese arrivals
have shown good growth patterns. Tourist numbers from growth turned positive in May 2017.
China, Russia, Korea, Japan, and India were up by 27.4%,
21.4%, 6.9%, 5.3% and 15.7% y-o-y in 5M18, respectively. Thailand: Yearly tourist arrivals in Thailand
European visitors (excluding Russians) grew 5.3% while US
visitor arrivals remained resilient, increasing by 6.9%. 38.0
37.0
25%
35.4
32.6
33.0 29.9 20%
Thailand: Monthly tourist arrivals to the country
28.0 26.4
25.2 15%
'000 People 23.0
22.3
19.2 10%
3,400 18.0 16.0
14.4 14.7 14.2
5%
3,000 13.0
2,600 0%
8.0
2,200
3.0 -5%
1,800
-2.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F -10%
1,400
1,000 Foreign visitors (m people)-LHS y-o-y growth- RHS

600 Source: Ministry of Tourism and Sports, DBSVTH


Jan

Aug
Mar

Apr

May

Nov
Sep
Feb

Oct

Dec
Jun

Jul

2010 2011 2012 2013 2014


Tourism receipts have exceeded the number of tourists. The
2015 2016 2017 2018
government would like to sustain the growth in both
volume and value over the long term by striking a fine
Source: Ministry of Tourism and Sports, DBSVTH
balance between the growth in the number of foreign
visitors and their spending. Therefore, Thailand has shifted
Thailand: 5M18 tourist arrivals by feeder markets the emphasis more towards quality rather than raw numbers
The Americas Middle East, 1.7% Africa, 0.4% Malay sia, 8.4% for measuring tourism success. The growth in tourism
excluding US, 1% Oceania, 2.2% Laos, 4.0%
receipts has outpaced that of the number of international
Other Europe, 8% Singapore, 2.3%
V ietnam, 2.1% visitors so far.
India, 3.5% Other Asia, 8%
Thailand: International tourist arrivals growth vs
USA, 2.9% tourism receipts growth
China, 30.4%
United Russia, 5.4%
Kingdom, 30%
2.7%
24% 25% 24%
25% 22%
21%

20% 23%
Germany , 2.8% 21%
France, 2.5% 19%
15% 12% 13%
Korea, 4.5% 12% 12% 12% 16%
J apan, 4.0% Hong Kong, 16%
2.0% 9%
10% 8% 7% 11% 6% 11%
Source: Ministry of Tourism and Sports, DBSVTH 5%
9% 9%
7% 6% 6%
5% 5%
0%
Foreign visitor numbers will continue to grow. Given
the increasing number of low cost carriers and fierce
% tourist arrivals y-o-y growth % tourism receipt y-o-y growth
competition between international airlines, the prices of the
air tickets have become more affordable. This is one of the Source: Ministry of Tourism and Sports, DBSVTH
reasons behind the growing numbers of foreigners to

Page 7
Industry Focus
Has domestic consumption really picked up?

Hotel room rate hikes to boost operating leverage. Thailand: Average room rate of hotels in Thailand
Given the solid growth in tourism demand, average
occupancy rates of all hotels in Thailand have risen from Bt/room
1,900
71.6% in 5M17 to 74.7% in 5M18, according to the Bank 1,800
of Thailand (BOT). Consequently, hotel operators in Thailand 1,700
were also able to increase their average room rates. In 1,600
5M18, the average room rate of hotels in Thailand stood at 1,500
Bt1,674/night, up by 10.4% y-o-y. For downtown Bangkok, 1,400
1,300
the average occupancy rate increased by 2.4ppts y-o-y to
1,200
85% in 1Q18, while the average room rate grew by 7% y-o-
1,100
y to Bt3,749 – the strongest y-o-y increase in the past five 1,000
years. In the same token for hotel operators under our

Jan

Aug
Mar

Apr

May

Nov
Sep
Feb

Oct

Dec
Jun

Jul
coverage, average occupancy rates have remained high and
2015 2016 2017 2018
hotel operators under our coverage were able to raise the
average room rate by a mid-single-digit rate in 1Q18. We Source: BOT, DBSVTH
expect a room rate hike of 4-5% y-o-y for FY18F.

In terms of hotel supply, the rate of new supply should be


Recovery in international tourist arrivals to the Maldives.
moderate and can be absorbed by the rising international
Foreign tourist demand in the Maldives has started to
tourist arrivals to Thailand. According to CBRE, another
recover strongly since 4Q17, rising by 14.6% y-o-y in 4Q17
2,957 hotel keys (+6.6% y-o-y) in downtown Bangkok are
and 12.7% in 4M18 vs an average growth of only 2-4% in
expected to be added in 2018. Of the total increase, most of
2015-2016. In 4M18, the Maldives’ two key source markets,
the new hotels will be in mid-range segment (37.8%),
which are Europe (55.8% of total international arrivals) and
followed by first-class (30.5%), luxury (24.5%), and
the Asian Pacific region (35.7%), helped drive the robust
economy (7.1%). By 2021, CBRE estimates that there will be
international tourist numbers. Tourists from Europe surged
52,004 hotel keys in downtown Bangkok (2017-2021 CAGR
by 18.2% y-o-y, while tourists from the Asian Pacific region
of 3.7%). For Phuket, hotel supply is forecasted to increase
grew by 5.1%. Note that tourist arrivals to the Maldives in
at a CAGR of 9.2% over 2017-2020. Of the total future
April registered flat growth due to a mismatch of Easter
hotel supply in Phuket, 46% will be in the mid-range
holidays for this and last year. Tourist demand should
segment, 35% in first-class, and 19% in luxury.
continue to be strong as the State of Emergency was lifted
on 22 March 2018. The Maldives’ Ministry of Tourism
Thailand: Average occupancy rate of hotels in Thailand expects international tourist arrivals to reach 1.5m people
p.a. (+7.9% y-o-y).
%

75 Maldives: Yearly foreign tourist arrivals to Maldives


1,600,000 25%

65 1,400,000 21%
20%
1,200,000 18% 17%

55 1,000,000 15%
800,000
13%
8% 10%
45 600,000 7%
8%
Jan

Aug
Mar

Apr

May

Sep

Nov
Feb

Dec
Oct
Jun

Jul

400,000 4%
3% 5%
2015 2016 2017 2018 2%
200,000

- 0%
Source: BOT, DBSVTH 2010 2011 2012 2013 2014 2015 2016 2017 2018F 4M17 4M18

Internataional tourist arrivals- LHS % growth y-o-y- RHS

Source: Maldives’ Ministry of Tourism, DBSVTH

Page 8
Industry Focus
Has domestic consumption really picked up?

Maldives: Monthly foreign tourist arrivals to Maldives hotel operators in the past two to three years. The rise in
bed capacity in the Maldives has outpaced the growth in
160,000 40%
international tourist arrivals since 2015. This has resulted in a
20% 19% 18%
140,000 16% 16%
8% 8% 9%
15% 14% 20% lower average room rate for many hotel operators in the
120,000 0% -2% 0% 2% 4%
0% Maldives, given the aggressive competition. Nevertheless,
100,000
0% the rebound in foreign visitors and decelerated growth of
80,000 -20%
hotel supply have eased the oversupply situation. In 4M18,
international tourist arrivals to the Maldives grew 12.7% y-
60,000
-40% o-y vs a rise in hotel rooms of 10.3%.
40,000
-60%
20,000

- -80%
Maldives: Tourist accommodation capacity
(operational)
45,000 14% 10% 0.2
Internataional tourist arrivals- LHS % growth y-o-y- RHS 6% 8%
4% 5% 0.1
40,000
Source: Maldives’ Ministry of Tourism, DBSVTH 0
35,000
-0.1
30,000
-0.2
Maldives: 2017 tourist arrivals by region 25,000
-0.3
Africa Central/Eastern 20,000
Middle East
1% Americas Europe -0.4
Oceania 5% 4% 15,000
9% -0.5
2%
10,000 -0.6
South Asia Northern Europe
8% 10% 5,000 -0.7
South East Asia
6% Southern Europe - -0.8
10% 2012 2013 2014 2015 2016 2017 4M17 4M18

No. of beds- LHS % growth y-o-y- RHS


North East Asia Western Europe
28% 16%
Source: Maldives’ Ministry of Tourism, DBSVTH

Maldives: Tourist accommodation capacity


East
Mediterranean
(operational)
Europe
1%
20%
Source: Maldives’ Ministry of Tourism, DBSVTH 17%
18%
16% 14%
Maldives: 2017 tourist arrivals by country 14% 12.7%
12%
Nationality % share % growth
10%
China 22.1% -5.5% 7%
8% 10.3%
8% 6%
Germany 8.1% 5.4% 5% 8%
6% 4%
UK 7.5% 2.1%
4%
Italy 6.4% 24.8% 4%
2%
India 6.0% 24.0% 2%
0%
Russia 4.5% 33.1% 2013 2014 2015 2016 2017 4M18
France 3.0% 4.6% % growth of foreign tourists % growth of no. of beds
US 2.8% 20.2%
Japan 3.0% 3.1% Source: Maldives’ Ministry of Tourism, DBSVTH
Korea 2.5% 17.7%
Switzerland 2.3% 3.1%
Australia 2.0% 16.0%
Spain 1.9% 10.5%
Thailand 1.9% 58.3%
Saudi Arabia 1.4% -11.0%

Source: Maldives’ Ministry of Tourism, DBSVTH


Hotel oversupply in Maldives has eased. Increasing hotel
supply in the Maldives has been the key challenging issue for

Page 9
Industry Focus
Has domestic consumption really picked up?

Maldives: Average occupancy rate Portugal: International tourist arrivals to the country

80% 14
12% 13% 15%
11% 11%
74% 12
75% 72% 8% 10%
8%
10
69% 69% 5%
70% 3% 5%
8 3%

65% 63% 6
61% 0%

4
60%
-5%
2
55% -8%
0 -10%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
50%
2014 2015 2016 2017 4M17 4M18
International tourist arrivals (mpeople)- LHS % growth y-o-y- RHS

Source: Maldives’ Ministry of Tourism, DBSVTH


Source: Reuters, DBSVTH

Promising long-term prospects in Maldives. The Maldives


government is developing a bridge that will link the Hulhule Sector earnings growth 23% this year. We expect sector
Island (which houses the current international airport) to the core earnings to increase 22.7% y-o-y to Bt35.2bn in 2018.
Maldives’ capital city, Male. This should improve inter-island 1Q18 earnings surged 8.6% y-o-y. These made up 28.7% of
transportation. Meanwhile, the Maldives is expanding its our full-year forecast.
airport with a new runway that can accommodate the
world’s largest passenger airliner (Airbus A380 jumbo jet),
followed by a new passenger terminal in late 2019. The new Tourism: Sector core earnings grew 9% y-o-y in 1Q18
airport will increase passenger capacity to 7.5m p.a. Core y-o- q-o-
1QFY17 4QFY17 1QFY18
(+15.4%). earnings y q
AOT 6,431.8 6,235.7 7,222.5 12% 16%
Growing tourism industry in Portugal. In Portugal, -
MINT 1,924.5 1,611 1,719.2 7%
11%
international tourist arrivals have been growing and hitting
CENTEL 747.10 542.40 883.00 18% 63%
record highs since 2010. According to the Lonely Planet
travel book publisher, Portugal is one of the top three ERW 208 161 286 38% 77%
hottest travel destinations worldwide for 2018 and the Total 9,311 8,551 10,110 9% 18%
number of foreign visitors should continue to grow strongly
this year. Portugal has lured tourists with its sandy beaches, Source: Company, DBSVTH
mediaeval castles, golfing activities, and also affordable
wining and dining in Western Europe. Additionally, security Tourism: Sector core earnings to grow 23% y-o-y in
fears for its rival sunshine destinations in the Mediterranean FY18F
and Middle East, such as France, Turkey, Tunisia, and Egypt
3- y ear
that have been hit by terror attacks in recent years, have Core earnings 2017 2018F y - o- y 1Q18/F Y 18F av erage
promoted Portugal to one of the world’s safest destinations. 1Q/f ull y ear
In 2017, Portugal welcomed 12.7m international tourists, an AOT 20,684 25,941 25% 28% 29%
increase of 11.4% y-o-y. British tourists were the largest MINT 5,415 6,318 17% 27% 34%
group of visitors (22.3%), followed by Germans (13.6%), CENTEL 2,056 2,336 14% 38% 44%
Spaniards (9.7%), and the French (9.5%). Visitors from the ERW 505.6 575 14% 50% 47%
US, Poland, and Brazil have shown strong growth as well. T ot al 28,661 35,170 23% 29% 39%
Note that Lisbon and Algarve remain the biggest draws to
the country. The country plans to have a second Source: Company, DBSVTH
international airport for Lisbon and it is expected to be
operational by 2021.

Page 10
Industry Focus
Has domestic consumption really picked up?

Our top picks are AOT and CENTEL. AOT remains our
favourite pick due to its positive long-term growth profile,
while CENTEL is a beneficiary of strong tourism in Thailand
and the rebound in tourism activities in the Maldives.
Top BUY: AOT. Strengthening its long-term growth profile.
AOT is currently facing capacity constraints at some of its
airports which may cap its short-term growth. However,
several factors such as airport capacity expansion, new duty
free/commercial concessions, airport city projects and
managing additional airports under the Department of
Airports will underpin its long-term growth.

Second BUY: CENTEL. Driven by strong hotel business.


Although CENTEL’s food SSSG recovery has been slower
than expected, the new food stores and its cost control
would still support food bottom-line. We expect CENTEL’s
FY18F earnings growth to be driven more by the hotel
business. The hotel unit will enjoy the tailwind of strong
international tourist arrivals to Thailand, which will allow
CENTEL to maintain its high occupancy rate and raise the
average room rate. This should lead to higher hotel
operating margins. Meanwhile, the recovery of international
tourist arrivals to the Maldives will support its operations in
this country, which contributes 19% of total hotel revenue.

Page 11
Industry Focus
Has domestic consumption really picked up?

Agri-food sector: Waiting for more meaningful margin recovery

CPF: Swine price in Thailand


Slowing organic revenue growth. Given the large revenue
Bt/kg
base of agri-food companies under our coverage, we expect 85
organic revenue growth to be unexciting (at mid-single
75
digits), even as these companies have embarked on efforts
to diversify their revenue base by geography, especially to 65
the emerging markets, as well as product segments.
55
Additionally, the real recovery of domestic consumption in
Thailand has not been seen, thus weighing on sales in 45
Thailand. The global fish and seafood market has been
35
growing steadily albeit slowly, especially in Europe and the

Jan

Aug
Mar

Apr

May

Nov
Sep
Feb

Oct

Dec
Jun

Jul
US where processed seafood consumption is quite stagnant
2013 Swine 2014 Swine 2015 Swine
and the competitive landscape is very fierce.
2016 Swine 2017 Swine 2018 Swine

Agri-food companies: Sales growth


Source: Company, DBSVTH
600,000 10% 12%
9% 9%
10%
500,000
8% CPF: Broiler price in Thailand
8%
6%
8% 8% 6% Bt/kg
400,000
6% 4% 50
300,000 4% 1% 2%
3% 45
2% 0%
200,000 40
-1% -2%
-4% 35
100,000
-5% -6% 30
- -8% 25
2013 2014 2015 2016 2017 2018F 1Q17 1Q18

Aug
Jan

Mar

Apr

May

Sep

Nov
Feb

Oct

Dec
Jun

Jul
TU's sales CPF's sales TU's sales growth CPF's sales growth
2013 Broiler 2014 Broiler 2015 Broiler
Source: Company, DBSVTH 2016 Broiler 2017 Broiler 2018 Broiler

Domestic meat prices to remain tepid in 2H18. The uptick Source: Company, DBSVTH
of domestic swine price in 2Q18 was unreal as it was
driven by the government’s intervention efforts. We expect Swine price recovery in Vietnam looks sustainable. The
the price to weaken thereafter, due to the lack of further recent rebound in swine price in Vietnam is expected to be
government measures and the fact that the impact of sustained, as CPF has also seen a sharp drop in feed sales
supply rationalisation may take another 1-2 quarters to that implies that a large portion of supply in the country
filter though. Therefore, the recent recovery in domestic has been cut. Additionally, swine price in Vietnam has
swine price is not sustainable. We have a similar view on started to retreat since Dec 2016 while the production
broiler price in Thailand, i.e. it would take another 1-2 cycle of swine is 1-1.5 years, thus indicating the oversupply
quarters for the price to recover. It may take a while for situation should have already ended. Nevertheless, we
Brazil’s supply cut and meaningful exports to new markets should watch out for risk of excess Chinese swine supply
like China to take effect. Therefore, domestic broiler prices flowing into Vietnam as the current swine price in China is
are still pressured by excess supply from Brazil that made its Bt50/kg, much lower than Vietnam’s Bt67/kg.
way into Asian markets after Europe banned such imports.

Page 12
Industry Focus
Has domestic consumption really picked up?

CPF: Swine price in Vietnam Tuna raw material price likely to rise in 3Q18. The skipjack
tuna raw material price has retreated from USD2,033/ton
VND/kg
in 4Q17 to USD1,577/ton in 1Q18. Lower average
60,000 inventory costs since Dec last year should benefit seafood
50,000 operators, particularly TU (whose inventory days stand at
40,000
118 days), in 2Q18. Nevertheless, tuna raw material price
has risen to the average of USD1,667/ton in 2Q18, and is
30,000
expected to head north in 3Q18 due to the ban on the use
20,000 of fishing aggregate devices (FAD) in the quarter.
10,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
TU: Skipjack tuna raw material price
2013 Swine 2014 Swine 2015 Swine

2016 Swine 2017 Swine 2018 Swine


USD/ton
2,500
Source: Company, DBSVTH. 2,300
2,100
1,900
Corn raw material price in a rising trend. Although soybean 1,700
raw material price has been quite stable, the price of another 1,500

key raw material, i.e. corn, is in an uptrend. Corn price rose 1,300
1,100
by 23.5% y-o-y in 1Q18 and continued to increase by 29.7% 900

in 2Q18, due to the government’s subsidy and shrinking area 700


500
of plantation.

CPF: Corn price in Thailand 2012 2013 2014 2015 2016 2017 2018

Source: Company, DBSVTH


Bt/kg
12
Volatile salmon raw material price. Salmon raw material
11
price surged from NOK55/kg in Jan 2018 to NOK76/kg in
10
May, and then plunged to NOK62/kg in June. The recent
9
fall of salmon raw material price was due to higher supply
8
arising from higher feeding and harvest activities, following
7
an increase in temperature in Norway. The high volatility of
6
salmon price can make it difficult for seafood operators to
May
Mar

Apr

Nov
Jan

Aug

Sep

Dec
Oct
Feb

Jun

Jul

budget for raw materials.


2013 Corn 2014 Corn 2015 Corn

2016 Corn 2017 Corn 2018 Corn TU: Salmon raw material price
Source: Company, DBSVTH
NOK/kg
80
CPF: Soybean price in Thailand 70
60
Bt/kg 50
22 40
20 30
18 20
10
16
0
14
12
10
Jan

Aug
Mar

Apr

May

Nov
Sep
Feb

Oct

Dec
Jul
Jun

2014 2015 2016 2017 2018

2013 Soybean 2014 Soybean 2015 Soybean


Source: Company, DBSVTH
2016 Soybean 2017 Soybean 2018 Soybean

Source: Company, DBSVTH

Page 13
Industry Focus
Has domestic consumption really picked up?

Gross margin is on a recovery trend, but the rebound is still Tourism: Sector core earnings to grow 24% y-o-y in
muted. We believe 1Q18 marked a trough for agri-food FY18F
companies under our coverage. We expect their core 3- y ear av erage
Core earnings 2017 2018F y - o- y 1Q18/F Y 18F
1Q/f ull y ear
earnings to improve sequentially in the following quarters.
CPF 5,694 9,160 61% -1% 27%
Nevertheless, we are waiting for a more meaningful margin
TU 6021 5374 -11% 13% 24%
recovery, as more time should be needed for supply
T ot al 11,715 14,534 24% 4% 25%
rationalisation to have an impact on domestic meat prices
and the price uptrend of key raw materials, particularly corn, Source: Company, DBSVTH
will pose additional key risks to their profitability.
Meanwhile, the volatility of tuna and salmon raw material
prices, and stiff competition are expected to weigh on TU’s We have HOLD calls on both CPF and TU. We prefer CPF
operations. to TU as the former’s signs of recovery are starting to
emerge. Nevertheless, we are waiting for a more
meaningful margin recovery for CPF before upgrading our
Sector earnings to grow 24% this year. We expect sector call on the stock.
core earnings to increase 24.1% y-o-y to Bt14.5bn in 2018.
This is after earnings plummeted 85.7% y-o-y in 1Q18. This
made up only 4% of our full-year forecast. However, we
expect the core earnings of agri-food companies to improve
in the sequential quarters.

Agri-food: Sector core earnings plummeted 86% y-o-y


in 1Q18
Core earnings 1Q17 4Q17 1Q18 y-o-y q-o-q
CPF 2,819 (1,560) (117) -104% -93%
TU 1,397 1,579 720 -48% -54%
Total 4,216 19 603 -86% na

Source: Company, DBSVTH

Page 14
Industry Focus
Has domestic consumption really picked up?

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: 5 Jul 2018 06:21:10 (THA)


Dissemination Date: 5 Jul 2018 08:29:39 (THA)

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

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

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

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

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

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

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

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

Page 15
Industry Focus
Has domestic consumption really picked up?

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

ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES


1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates have a
proprietary position in Airports of Thailand , CP ALL , Charoen Pokphand Foods, Minor International, Home Product Center recommended in
this report as of 31 May 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.

Page 16
Industry Focus
Has domestic consumption really picked up?

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. AH 8283) at equityresearch@dbs.com.

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.

Page 17
Industry Focus
Has domestic consumption really picked up?

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.

Page 18
Industry Focus
Has domestic consumption really picked up?

DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE


DBS Bank (Hong Kong) Limited 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: equityresearch@dbs.com Fax: 603 2604 3921 e-mail: equityresearch@dbs.com
Participant of the Stock Exchange of Hong Kong e-mail: general@alliancedbs.com 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 Bangkok Thailand 10330
Tel: 62 21 3003 4900 Tel. 66 2 857 7831
Fax: 6221 3003 4943 Fax: 66 2 658 1269
e-mail: research@id.dbsvickers.com e-mail: research@th.dbs.com
Company Regn. No 0105539127012
Securities and Exchange Commission, Thailand

Page 19