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KCE Electronics Summary (October 2017)

Core Content

This document provides a detailed analysis of KCE Electronics (KCE), a Thai company, with a focus on its financial performance, valuation, and market outlook. The analysis is based on data as of 23 August 2017, and it includes key financial metrics, major shareholders, and analyst recommendations.

Key Financials

• Closing Price (Bt): 101.50
• 52-Week High/Low (Bt): 130 / 79.75

Financial Outlook

• FY17 Net Profit: Revised downward to Bt2,692mn, reflecting an 11% year-over-year drop due to:
  • A sharp 18% increase in copper prices (a major raw material).
  • Delayed revenue realization from some major customers due to a shift to consignment basis.
  • Weak sales growth in the double-side PCB segment due to non-price competition strategies.
• FY18 Net Profit: Expected to rise to Bt3,066mn, an 14% increase year-over-year, driven by:
  • New capacity additions to meet existing orders, particularly in the auto segment.
  • A focus on high-margin products such as high-layer products and HDI (High-Density Interconnect) to improve margins.
  • Despite weak market demand, the company is expected to see sales growth of 9% year-over-year.

Analyst Recommendation

• Rating: SELL
• Target Price (Bt): 91.50
• Reason: The company's current valuation is considered overstretched at 19x P/E. The earnings recovery story is already reflected in the share price, and the analyst maintains a 'SELL' call due to the high valuations.

Valuation Method

• PE'18 (18x): The valuation is based on the 18x P/E multiple.
• Analyst: Naree Apisawaittakan
• Contact: Tel: 662 635 1700 Ext 484

Major Shareholders (as of 23 August 2017)

1. Mr. Pitan Ongkosit: 13.7%
2. Thai NVDR: 10.6%
3. APCO CAPITAL PTE. LTD.: 7.5%

Corporate Governance

• The document includes a list of companies and their participation in the Thai Corporate Governance Survey.
• It also provides a table of companies categorized under different sectors such as Agro & Food Industry, Consumer Products, Financials, Industrials, Property & Construction, Resources, and Services.

PSR Rating System

• Capital Gain Recommendations:

  • 15%: BUY

  • 5% - 15%: ACCUMULATE / TRADING BUY

  • 0% -5%: NEUTRAL

  • <0%: SELL

• The recommendation is not solely based on quantitative return bands but also considers qualitative factors like:

  • Risk reward profile
  • Market sentiment
  • Recent share price appreciation
  • Presence of stock price catalysts
  • Speculative undertones

Analysts and Contact Information

• Sasikorn Charoensuwan, CFA, CAIA: Capital Market Investment Analyst #9744
• Danai Tunyaphisitchai, CFA: Capital Market Investment Analyst #2375
• Naree Apisawaittakan: Securities Investment Analyst #17971
• Siam Tiyanont: Securities Investment Analyst #17970
• Adisorn Muangparnchon: Securities Investment Analyst #18577
• Hathaichanoke Moonwong: Securities Investment Analyst #64324
• Pattraporn Boonmalert: Assistant Analyst
• Athid Siriphand: Assistant Analyst
• Pachara Yenpaisarn: Assistant Analyst
• Teerada Charnyingyong: Securities Investment Analyst #9501
• Chutikarn Santimetvirul: Derivatives Investment Analyst #37928
• Rattawit Watcharasut: Securities Investment Analyst #88285
• Klanarong Mongkolsirichaikul: Assistant Analyst
• Kitti Buabueng: Assistant Analyst

Offices

Domestic Offices (Bangkok)

• Head Office: 849 Vora wat Bldg., 11st FI., Unit 1101, 1102, 1104, 14th FI., Unit 1403, 1404 and 15th FI., 22nd FI., Unit 2202, Silom Rd. Silom, Bangrak, Bangkok 10500
• Srinakarindr: 699 Modernform Tower, 17th FI., Srinakarindr Rd., Suan Luang, Bangkok 10250
• Viphavadee: 333 Lao Peng Nguan Tower 1, 15th FI., Soi Chuaypuang, Viphavadi-Rangsit Rd., Jomphon, Chatuchak, Bangkok 10900
• Yaowaraj: 308 Kanchanadhat Bldg., 19th FI., Yaowarat Rd., Jakawat, Sampantawong, Bangkok 10100
• Bangkapi 1: 3522 The Mall Office Tower-Bangkap, 8th FI., Lad Prao Rd., Klongchan, Bangkapi, Bangkok 10240
• Bangkapi 2: Same as Bangkapi 1
• Hualumphong: 320 Tang Hua Pak Bldg., 4th FI., Rama 4 Rd., Mahaprutharam, Bangrak, Bangkok 10500
• Rangsit: 94 Future Park Rangsit, G FI., Room#PLZ.G.SHPO65A, Paholyothin Rd., Prachatipat, Thunyaburi, Pathumthani 12130
• Siam Discovery: 989 Siam Tower Building, 11th FI., Unit A2, Rama I Rd., Pathumwan, Bangkok 10330
• Central World: 999/9 The Offices at CentralWorld, 17 FL. Unit ML 1707, Rama I Rd, Pathumwan, Bangkok 10330
• Sindhorn: 130-132 Sindhorn Tower 3 Building, 19 Floor, Wireless Rd., Lumpini, Pathumwan, Bangkok 10330
• EmQuartier: 689 Bhiraj Tower at EmQuartier, 39th floor, Unit 3909-10, Sukhumvit Rd., Klongton Nuea, Vadhana, Bangkok 10110

Provincial Offices

• Chiang Mai: 111/51 Moo 2 Mahidol Rd., Nong Hoi, Muang Chiang Mai, Chiang Mai 50000
• Had Yai: 55 Southland Rubber Bldg., 4th Fl., Ratyindee Rd., Had Yai, Songkla 90110
• Had Yai - Petkaseam: 607 Redar Group Bldg., 3rd Fl., Unit 3D, Petkaseam Rd., Had Yai, Songkla 90110
• Khon Kaen: 359/2 Kow Yoo Hah Bldg., 4th Fl., Mittapap Rd., Naimuang, Muang Khon Kaen, Khon Kaen 40000
• Phitsanulok: 59/15 Thai Sivarat Bldg., 2nd Fl., Baromtrilokanad 2 Rd., Naimuang, Muang Pitsanulok, Phitsanulok 65000
• Chumporn: 25/45 Krom Luang Chumporn Rd., Tatapao, Chumporn 86000
• Leamchabang: 53/112, 53/114 Moo 9, Tungsukla, Sriracha, Chonburi 20230
• Investor Center Khon Kaen: 252 Moo 11, Muang Kao, Khon Kaen 40000
• Investor Center Chiang Mai: 191/6 Changklan Rd., Changklan, Chiang Mai 50100

Overseas Offices

• Singapore: Phillip Securities Pte Ltd, Raffles City Tower, Tel: (65) 6533 6001, www.poems.com.sg
• Hong Kong: Phil

Conclusion

The report highlights that while KCE is expected to see an earnings recovery in FY18, the current valuations are considered too high, leading to a 'SELL' recommendation. The company's financial performance in FY17 was impacted by rising raw material costs, delayed revenue realization, and weak sales growth, but the outlook for FY18 is more positive due to new capacity additions and a strategic shift towards higher-margin products. The document also provides a comprehensive list of domestic and provincial offices, as well as overseas locations, and outlines the PSR rating system for investment decisions.