Carabao Group Stepping up to become global brand with sponsorship deal with England's Chelsea Football Club

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2 THAILAND EQUITY RESEARCH Carabao Group Stepping up to become global brand with sponsorship deal with England's Chelsea Football Club THAILAND SET FOOD COMPANY VISIT BLOOMBERG CBG TB l REUTERS CBG.BK 9MFY15 net profit sees robust growth on lower cost, financial cost, effective tax rate CBG registered 9MFY15 net profit of Bt967.4mn, up 51.5% y y. Key factors to the robust growth were (1) a decrease in cost of own production of amber glass bottle, which pushed gross margin up by 3.8% to 36.9%; (2) a sharp decrease in financial cost after CBG paid down its debts with its IPO proceeds; and (3) lower effective tax rate of 14.7% on BOI s tax privilege for in house production of amber glass bottle. Total sales grew slightly by 2.6% to Bt5,676.7mn with domestic sales rising 3.5% and international market up fractionally by 0.4%. Establishment of four distribution centers in the northeastern region tackled any logistics headwinds and thereby increasing its penetration in the area. In overseas market, an astounding growth of 58.6% in Cambodia was pressured by subdued sales in Afghanistan and Yemen, due to civil wars. FY15 net profit forecast downgrade, FY16 outlook upgraded on extending market presence into Europe We cut our FY15 net profit estimate by 6.5% to Bt1,301.7mn. The downgrade reflects subdued sales in international market, particularly a lack of sales in Afghanistan in 3QFY15, and an increase in our SG&A expense assumption due to a Bt30mn FX loss. Nevertheless, the FY15 net profit expectation at Bt1,301.7mn represents a strong growth of 42.6% on the spectacular profit growth in 9MFY15, thanks to lower cost and effective tax rate because of its in house production of amber glass bottle, and declined financial cost as CBG used its IPO proceeds to pay down its debts. In 2016, we raise our FY16 net profit by 3.3% to Bt1,693.7mn, representing a growth of 30% y y. Sales are forecast to grow by 21.2% on the back of more distribution centers and rising cash vans. CBG aims to increase its distribution centers to 27 next year and cash vans to 293 that will increase its market coverage to 300,000 shops nationwide. With this in the picture, CBG has a plan to set up a distribution company to strengthen its revenue growth. For international market, the company s focus remains on CLMV market, particularly Cambodia given its steadily robust growth on an annual basis. In addition, the company extends its market presence into Europe by spending roughly Bt1,650mn (or 30mn pounds) to be a principal partner with England s Chelsea Football Club for three years. In this regard, CBG is responsible for a third of total marketing expense while its authorized distributors in European and American regions will take care of the rest. We estimate roughly FY16 sales of Bt315mn in Europe, assuming sales volume of 5% of CBG s can output, and estimate retail price of one pound per can. NEUTRAL rating with target price of Bt37.25/share Our FY16 target price is Bt37.25/share, switching to PER multiple of 22, similar to SAPPE given its similar market landscape in terms of overseas market penetration and premium market target. At current share price, we rate CBG a NEUTRAL stance. Closing Price(Bt) Target Price(Bt) (+4.2%) COMPANY DATA O/S Shares (mn) : 1,000 Market Cap. (Btmn) : 35,750 Market Cap. (USDmn) : WK Hi/Lo (Bt) : 44/ M Average Daily T/O (mn) : 0.85 Par Value (Bt) : 1.00 MAJOR SHAREHOLDERS (%) 1. Sathientham Holding Co., Ltd. 24 August Ms. NutchamaiThanombooncharoen Mr. Yuenyong Opakul 11.6 PRICE PERFORMANCE (%) 1MTH 3MTH 1YR ABS 8% 7% 1% REL TO SET INDEX 6% 6% 18% PRICE VS SET INDEX Source: Bloomberg, PSR KEY FINANCIALS FYE Dec FY13 FY14 FY15E FY16E Sales(Btmn) 6,863 7,448 7,666 9,294 Net Profit(Btmn) ,302 1,694 EPS (Bt) P/E (X) BVPS (Bt) P/B (X) DPS (Bt) Dividend Yield (%) ROE (%) Debt/Equity (X) Source: Company, PSR Est. **Multiples and yields are based on latest closing price VALUATION METHOD P/E'16 (22x) 01 December 2015 Neutral (Maintain) Nov 12 Nov 13 Nov 14 Nov 15 CBG TB EQUITY SETI (rebased) Vichuda Siriployprakray Securities Investment Analyst # Tel: # 525 Ref. No.: CO2015_00903 Page 1 PHILLIP SECURITIES (THAILAND)

3 THAILAND EQUITY RESEARCH Corporate Governance 2015 ADVANC BAFS BCP BIGC BTS CK CPN DRT DTAC DTC EASTW EGCO GRAMMY HANA HMPRO INTUCH IRPC IVL KBANK KCE KKP KTB LHBANK LPN MCOT MINT MONO NKI PHOL PPS PS PSL PTT PTTEP PTTGC QTC RATCH ROBINS SAMART SAMTEL SAT SC SCB SCC SE ED SIM SNC SPALI THCOM TISCO TKT TMB TOP VGI WACOAL AAV ACAP AGE AHC AKP AMATA ANAN AOT APCS ARIP ASIMAR ASK ASP BANPU BAY BBL BDMS BECL BKI BLA BMCL BOL BROOK BWG CENTEL CFRESH CHO CIMBT CM CNT COL CPF CPI CSL DCC DELTA DEMCO ECF EE ERW GBX GC GFPT GLOBAL GUNKUL HEMRAJ HOTPOT HYDRO ICC ICHI INET IRC KSL KTC LANNA LH LOXLEY LRH MACO MBK MC MEGA MFEC NBC NCH NINE NSI NTV OCC OGC OISHI OTO PAP PDI PE PG PJW PM PPP PR PRANDA PREB PT PTG Q CON QH RS S & J SABINA SAMCO SCG SEAFCO SFP SIAM SINGER SIS SITHAI SMK SMPC SMT SNP SPI SSF SSI SSSC SST STA STEC SVI SWC SYMC SYNTEC TASCO TBSP TCAP TF TGCI THAI THANA THANI THIP THRE THREL TICON TIP TIPCO TK TKS TMI TMILL TMT TNDT TNITY TNL TOG TPC TPCORP TRC TRU TRUE TSC TSTE TSTH TTA TTCL TTW TU TVD TVO TWFP TWS UAC UT UV VNT WAVE WINNER YUASA ZMICO 2S AEC AEONTS AF AH AIRA AIT AJ AKR AMANAH AMARIN AP APCO AQUA AS ASIA AUCT AYUD BA BEAUTY BEC BFIT BH BIG BJC BJCHI BKD BTNC CBG CGD CHG CHOW CI CITY CKP CNS CPALL CPL CSC CSP CSS CTW DNA EARTH EASON ECL EFORL ESSO FE FIRE FOCUS FORTH FPI FSMART FSS FVC GCAP GENCO GL GLAND GLOW GOLD GYT HTC HTECH IEC IFEC IFS IHL IRCP ITD JSP JTS JUBILE KASET KBS KCAR KGI KKC KTIS KWC KYE L&E LALIN LHK LIT LIVE LST M MAJOR MAKRO MATCH MATI MBKET M CHAI MFC MILL MJD MK MODERN MOONG MPG MSC MTI MTLS NC NOK NUSA NWR NYT OCEAN PACE PATO PB PCA PCSGH PDG PF PICO PL PLANB PLAT PPM PRG PRIN PSTC PTL PYLON QLT RCI RCL RICHY RML RPC S SALEE SAPPE SAWAD SCCC SCN SCP SEAOIL SIRI SKR SMG SOLAR SORKON SPA SPC SPCG SPPT SPVI SRICHA SSC STANLY STPI SUC SUSCO SUTHA SYNEX TAE TAKUNI TCC TCCC TCJ TEAM TFD TFI TIC TIW TLUXE TMC TMD TOPP TPCH TPIPL TRT TSE TSR UMI UP UPF UPOIC UREKA UWC VIBHA VIH VPO WHA WIN XO Results Presentation Score Range Number of Logo < 50% No logo given 50 59% 60 69% 70 79% 80 89% % The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative disclosure to the public and able to be accessed by a general public investor. The results, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that data. Phillip Securities (Thailand) of securities company does not confirm nor certify the accuracy of such survey result. PHILLIP SECURITIESS (THAILAND) 2 P age

4 THAILAND EQUITY RESEARCH Industry Group Name Sector Name Sector Index Agro & Food Industry[AGRO] Agribusiness AGRI Food & Beverage FOOD Consumer Products[CONSUMP] Fashion FASHION Home & Office Products HOME Personal Products & Pharmaceuticals PERSON Financials [FINCIAL] Banking BANK Finance & Securities FIN Insurance INSUR Industrials [INDUS] Automotive AUTO Industrial Materials & Machinery IMM Packaging PKG Paper & Printing Materials PAPER Petrochemicals & Chemicals PETRO Steel STEEL Property & Construction[PROPCON] Construction Materials CONMAT Construction Services CONS Property Development PROP Property Fund & REITs PF&REIT Resources [RESOURC] Energy & Utilities ENERG Mining MINE Services [SERVICE] Commerce COMM Media & Publishing MEDIA Health Care Services HELTH Tourism & Leisure TOURISM Professional Services PROF Transportation & Logistics TRANS Technology [TECH] Electronic Components ETRON Information & Communication Technology ICT PSR Rating System Capital Gain Recommendation > +10% Buy 0% to + 10% Neutral < 0% Sell Remarks We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation PHILLIP SECURITIESS (THAILAND) 3 P age

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