Thailand

Flash Note
Refer to important disclosures at the end of this report

DBS Group Research . Equity 1 Nov 2018

Hana Microelectronics (HANA TB) : BUY

Mkt. Cap: US$877m I 3m Avg. Daily Val: US$4.2m
Last Traded Price ( 31 Oct 2018): Bt36.25
Price Target 12-mth: Bt43.50 (20% upside)
Hana Microelectronics- iBanking Login
Hana Microelectronics- Institution Login
Analyst
Thailand Research Team +662 658 1222; research@th.dbs.com
Nantika WIANGPHOEM, CFA +66 28577836; nantikaw@th.dbs.com

Regain core earnings growth y-o-y

• 3Q18F core earnings to come in at Bt680, (+5% y-o-y, What’s New
+34% q-o-q), thanks to strong demand from telco IC To post 3Q18F core profit of Bt680m (+5% y-o-y, +34% q-
assembly o-q). We expect to revenue growth in USD terms to remain
string at 9% y-o-y thanks to the ramping up in production
• Gross margin to rise to 15.0%, thanks to q-o-q baht
capacity. The solid revenue growth is supported by PCB
depreciation and higher economies-of-scale benefits
assembly and IC assembly, especially with increasing volume
• Maintain BUY and TP of Bt43.50, pegged to 15x FY19F from telco IC packaging for Chinese smartphones.
PE
We expect 3Q18F net earnings to come in at Bt790m (+3%
y-o-y, +192% q-o-q). This is mainly thanks to the gain on
exchange of Bt110 as the Thai baht had appreciated
Forecasts and Valuation towards the end of 3Q18 to THB32.3/USD from
FY Dec (Btm) 2017A 2018F 2019F 2020F THB33.0/USD at the end of 2Q18.
Revenue 21,551 22,834 24,005 25,206
EBITDA 3,412 3,302 3,441 3,524 4Q18F will be supported by telco industry. Demand for
Pre-tax Profit 3,020 2,052 2,460 2,643 smartphone sensors will continue to be a key revenue driver
Net Profit 2,888 1,931 2,332 2,535 for 4Q18F. In August, World Semiconductor Trade Statistics
Net Pft (Pre Ex.) 2,357 2,215 2,332 2,535
Net Pft Gth (Pre-ex) (%) 16.3 (6.0) 5.3 8.7
had revised up the forecasted worldwide semiconductor
EPS (Bt) 3.59 2.40 2.90 3.15 market growth from 12.4% to 15.7% y-o-y, to reach a size
EPS Pre Ex. (Bt) 2.93 2.75 2.90 3.15 of US$477bn. 8M18 semiconductor sales have already hit
EPS Gth Pre Ex (%) 16 (6) 5 9 US$308bn, implying 19.2% y-o-y growth. We view this as a
Diluted EPS (Bt) 3.59 2.40 2.90 3.15
Net DPS (Bt) 2.00 2.00 2.00 2.00 positive signal of further upward revisions.
BV Per Share (Bt) 25.7 26.5 27.4 27.8
PE (X) 10.1 15.1 12.5 11.5 Maintain BUY with TP of Bt43.50, pegged to 15x PE FY19F.
PE Pre Ex. (X) 12.4 13.2 12.5 11.5 We continue to like HANA for its attractive valuation as it is
P/Cash Flow (X) 10.4 7.3 7.9 8.4 trading below the peer average PE and it offers decent a
EV/EBITDA (X) 5.7 5.6 5.0 4.6
dividend yield of c.5-6%. Its share price slid by c. 9% during
Net Div Yield (%) 5.5 5.5 5.5 5.5
P/Book Value (X) 1.4 1.4 1.3 1.3 the market selloff in October, which presents a good
Net Debt/Equity (X) CASH CASH CASH CASH opportunity to accumulate HANA shares in view of the
ROAE (%) 14.2 9.2 10.8 11.4 potential upside of 20% to our TP and the potential upside
Source of all data on this page: Company, DBSVTH, Bloomberg risks arising from the ongoing trade tension between the US
Finance L.P. and China. Therefore, we maintain our BUY call on HANA.

ed: CK / sa: CW, CS

Flash Note

3Q18F Results Preview

FY (Btm) 3Q17 2Q18 3Q18F % chg yoy % chg qoq

Sales (US$m) 172 171 188 9% 10%

Avg Bt/US$ 33.35 31.87 32.97 -1% 3%

Revenue 5,749 5,450 6,195 8% 14%

Cost of Goods Sold (4,914) (4,711) (5,265) 7% 12%
Gross Profit 835 739 929 11% 26%
Other Oper. (Exp)/Inc (290) (318) (321.22) 11% 1%
Operating Profit 545 421 608 12% 44%
Net other income (expenses) 87 81 77 -12% -6%
Net interest income (expenses) 47 46 50 8% 10%
Pre-tax Profit 679 548 735 8% 34%
Tax (31) (42) (55) 79% 31%
Normalised profit 648 506 680 5% 34%
Extraordinary items 122 (236) 110 -10% -147%
Net profit 770 270 790 3% 192%
Margins (%)
Gross Margins 14.5 13.6 15.0
Opg Profit Margins 9.5 7.7 9.8
Normalised Profit Margins 11.3 9.3 11.0
Net Profit Margins 13.4 5.0 12.8
Source of all data: Company, DBSVTH

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Target Price & Ratings History

Source: DBSVTH
Analyst: Thailand Research Team
Nantika WIANGPHOEM, CFA

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

THAI-CAC is Companies participating in Thailand's Private Sector Score Description

Collective Action Coalition Against Corruption programme (Thai Declared Companies that have declared their intention to join CAC
CAC) under Thai Institute of Directors (as of May 2018) are Certified Companies certified by CAC.
categorised into:
Score Range Number of Logo Description
Corporate Governance CG Rating is based on Thai Institute of 90-100 Excellent
Directors (IOD)’s annual assessment of corporate governance
practices of listed companies. The assessment covers 235 criteria 80-89 Very Good
in five categories including board responsibilities (35% weighting), 70-79 Good
disclosure and transparency (20%), role of stakeholders (20%),
equitable treatment of shareholders (10%) and rights of 60-69 Satisfactory
shareholders (15%). The IOD then assigns numbers of logos to
50-59 Pass
each company based on their scoring as follows:
<50 No logo given N/A

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Flash Note

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: 1 Nov 2018 06:12:03 (THA)

Dissemination Date: 1 Nov 2018 07:14:40 (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
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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.

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Flash Note

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.
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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
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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
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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
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not have
a proprietary position in the securities Hana Microelectronics recommended in this report as of 30 Sep 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
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wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any
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Disclosure of previous investment recommendation produced:

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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
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affiliates in the preceding 12 months.

1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person
accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term
does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new
listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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Flash Note

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Flash Note

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