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报告摘要

Summary of Khon Kaen Sugar (KSL TB)

Core Content

Khon Kaen Sugar (KSL TB) is a Thai sugar company that has been upgraded from HOLD to BUY with a target price of THB16, representing a 19% increase from the current share price of THB13.50. The company has a market capitalization of THB22.8 billion and a free float of 29.5%. The business has diversified into power generation, ethanol, and ancillary services, which have helped mitigate the volatility of the sugar industry.

Main Points

Crushing Volume and Yield: KSL's crushing volume increased by 124% YoY, and yield improved by up to 18%. These factors are expected to drive a 30% YoY net profit growth in FY14F.
Profit Outlook: The company is projected to have a net profit of THB2.1–2.3 billion in FY14 and FY15, with a core net profit of THB2.167 billion for FY14E.
Price Target: The target price of THB16 is based on a DCF model with an 8.8% WACC and a 3% terminal growth rate. This is higher than the previous target price of THB12.5.
Earnings Growth: KSL is expected to show sequential growth in earnings, with a 50% QoQ increase in 2Q14 and a 70% QoQ increase in 3Q14.
Sugar Price Rally: A potential El Nino event could disrupt global sugar output, leading to a sustained rally in sugar prices, which would benefit KSL's earnings and share price.
Dividend Yield: The net dividend yield is expected to rise from 3.3% in FY13A to 4.6% in FY14E.
Valuation: KSL's current P/E ratio is around 10.5x, which is cheaper than the market's 13x. It is trading at 10.9x P/E, below the regional average of 12x.

Key Information

Market Performance: KSL has outperformed the SET index by 8% in the past three months.
Revenue Growth: Revenue is expected to increase by 32.4% in FY14E compared to FY12A.
EBITDA Growth: EBITDA is projected to grow by 30.3% in FY14E.
Profitability: The company's core net profit is expected to grow by 30.4% YoY in FY14E, with core EPS increasing to THB1.27.
Debt and Leverage: Net debt/equity is projected to decrease from 155.4% in FY13A to 101.4% in FY16E.
Share Price Impact: The stock may react negatively to weak 1Q14 performance due to delayed sugar delivery and falling prices, but the outlook for the rest of the year is positive.

Business Structure and Diversification

Sugar Operations: KSL is one of the largest sugar cane crushers in Thailand, with a capacity of 108,000 tons of cane per day, up 17% YoY.
Diversification: The company has expanded into power, ethanol, and ancillary services. It also has a sugar plantation and crushing facility in Cambodia.
Power Business: KSL has 160MW of power capacity, with 40MW currently sold to the national grid. The company aims to increase this to 60MW, which could add about THB200 million to gross profit and increase net profits by 10%.
Earnings Drivers: The sugar segment is still the primary driver of profitability, but the power and ethanol businesses are increasingly contributing to net profit.

Risk and Upside

Upside Risk: The potential for a sugar price rally due to supply concerns from El Nino could significantly boost earnings.
Possible Disappointment: 1Q14 earnings may show a 5% YoY decline due to lower sugar prices and delayed delivery, but this is expected to be offset by higher volumes and a weaker THB.
Recommendation: Despite the weak 1Q14 performance, the stock is recommended for purchase due to the strong outlook for the remainder of the year and the potential for higher earnings.

Valuation Metrics

Metric	FY12A	FY13A	FY14E	FY15E	FY16E
Revenue (THB m)	22,212.3	18,941.0	25,069.2	24,792.2	25,249.8
EBITDA (THB m)	4,587.9	3,413.6	4,448.7	4,737.9	4,008.9
Core Net Profit (THB m)	2,354.3	1,661.0	2,166.7	2,358.4	1,780.8
Core EPS (THB)	1.49	0.97	1.27	1.38	1.04
Core P/E (x)	9.0	13.8	10.5	9.7	12.8
P/BV (x)	2.1	1.9	1.7	1.6	1.5
Net Dividend Yield (%)	3.7	3.3	4.3	4.6	3.5
ROAE (%)	22.2	12.7	14.6	14.5	10.2
ROAA (%)	8.8	5.1	6.0	6.5	4.7
EV/EBITDA (x)	8.0	12.4	9.2	8.7	10.2
Net Debt/Equity (%)	133.6	155.4	118.2	109.8	101.4

Peer Comparison

Name	Country	P/E (2014)	P/E (2015)	P/BV (2014)	P/BV (2015)	ROE (2014)	ROE (2015)	Yield (2014)	Yield (2015)
KHONBURI SUGAR PCL	TH	8.5	7.4	1.5	1.3	18.1	17.6	4.9	5.7
KHON KAEN SUGAR INDUSTRY PCL	TH	10.9	9.5	1.6	1.5	14.5	15.7	3.7	4.3
THAI VEGETABLE OIL PCL	TH	13.1	12.9	2.5	2.5	21.6	18.8	5.9	5.5
ARCHER-DANIELS-MIDLAND CO	US	12.8	12.1	1.3	1.2	10.1	9.7	2.0	2.1
BUNGE LTD	US	11.5	10.4	1.0	0.9	9.1	9.3	1.6	1.7
WILMAR INTERNATIONAL LTD	SI	11.9	11.0	1.4	1.3	9.4	9.5	1.6	1.7
MSM MALAYSIA HOLDINGS BHD	MA	13.3	12.5	1.8	1.7	13.0	13.5	4.1	4.5
AVERAGE - Bloomberg consensus	-	12.0	11.2	1.6	1.5	13.5	13.4	4.0	4.1

Research Contact

Regional Head of Institutional Research: Wong Chew Hann, (603) 2297 8686, wchewh@maybank-ib.com
Regional Head of Retail Research: Ong Seng Yeow, (65) 6432 1453, ongsengyeow@maybank-ke.com.sg
Institutional Product Manager: Alexander Garthoff, (852) 22680638, alexgarthoff@kimeng.com.hk
Chief Economist: Suhaimi Jilias, (603) 22978682, suhaimi_ilias@maybank-ib.com
Philippines Economist: Luz Lorenzo, (63) 28498836, luz_lorenzo@maybank-atrke.com