Chapter 1

The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. What are economic indicators and why are they important? An economic indicator is simply any economic statistic, such as the unemployment rate, GDP, or the inflation rate, which indicate how well the economy is doing and how well the economy is going to do in the future. To understand economic indicators, we must understand the ways in which economic indicators differ. There are three major attributes each economic indicator has: 1. Relation to the Business Cycle / Economy Economic Indicators can have one of three different relationships to the economy: 1.1 Procyclic: A procyclic (or procyclical) economic indicator is one that moves in the same direction as the economy. So if the economy is doing well, this number is usually increasing, whereas if we're in a recession this indicator is decreasing. The Gross Domestic Product (GDP) is an example of a procyclic economic indicator. 1.2 Countercyclic: A countercyclic (or countercyclical) economic indicator is one that moves in the opposite direction as the economy. The unemployment rate gets larger as the economy gets worse so it is a countercyclic economic indicator. 1.3 Acyclic: An acyclic economic indicator is one that has no relation to the health of the economy and is generally of little use. The number of home runs the Montreal Expos hit in a year generally has no relationship to the health of the economy, so we could say it is an acyclic economic indicator.


2. Frequency of the Data In most countries GDP figures are released quarterly (every three months) while the unemployment rate is released monthly. Some economic indicators, such as the Dow Jones Index, are available immediately and change every minute. 3. Timing Economic Indicators can be leading, lagging, or coincident which indicates the timing of their changes relative to how the economy as a whole changes. 3.1 Leading: Leading economic indicators are indicators which change before the economy changes. Stock market returns are a leading indicator, as the stock market usually begins to decline before the economy declines and they improve before the economy begins to pull out of a recession. Leading economic indicators are the most important type for investors as they help predict what the economy will be like in the future. 3.2 Lagged: A lagged economic indicator is one that does not change direction until a few quarters after the economy does. The unemployment rate is a lagged economic indicator as unemployment tends to increase for 2 or 3 quarters after the economy starts to improve. 3.3 Coincident: A coincident economic indicator is one that simply moves at the same time the economy does. The Gross Domestic Product is a coincident indicator. Main indicators: 1. THAI BAHT EXCHANGE RATE LIVE CHART (USDTHB) Thai Baht Exchange Rate Live Chart (USDTHB), quotes, historical data, forecast and news. The exchange rate between two currencies specifies how much one currency is worth in terms of the other. The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. The foreign

exchange market is one of the largest markets in the world with nearly 4 trillion USD worth of currency changing hands every day.

2. THAILAND INTEREST RATE Thailand Interest Rate chart, historical data, forecast and news. In Thailand, interest rate decisions are taken by The Bank of Thailand’s Monetary Policy Committee. The main interest rate is the 1-day repurchase rate.The term interest rate refers to the yearly price charged by a lender to a borrower in order for the borrower to obtain a loan. This is usually expressed as a percentage of the total amount loaned. The relation between the interest rate and the time to maturity of the debt for a given borrower in a given currency is known as yield curve.


3. THAILAND STOCK MARKET CHART (STOCK EXCH OF THAI) Thailand Stock Market Chart (STOCK EXCH OF THAI) historical data, forecast and news. The combined size of stock markets around the world was estimated at about $36.6 trillion USD at the beginning of October 2008. The New York Stock Exchange (NYSE) is the largest stock exchange in the world by dollar volume and has 2,764 listed securities.


4. THAILAND INFLATION RATE Thailand Inflation Rate chart, historical data, forecast and news. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.

5. THAILAND UNEMPLOYMENT RATE Thailand Unemployment Rate chart, historical data, forecast and news. Unemployment rate is defined as the level of unemployment divided by the labour force. The labour force is defined as the number of people employed plus the number unemployed but seeking work. The nonlabour force includes those who are not looking for work, those who are institutionalised and those serving in the military.


Growth Indicators: 1. THAILAND GDP GROWTH RATE Thailand GDP Growth Rate chart, historical data, forecast and news. Thailand is the second largest national economy in Southeast Asia. In 2007, Thailand’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $520 billion, according to the International Monetary Fund. The country is currently classified as Lower Middle Income economy by the World Bank, with $3,732 GDP per capita.


2. THAILAND GROSS DOMESTIC PRODUCT (GDP) Thailand Gross Domestic Product (GDP) chart, historical data, forecast and news. Thailand is the second largest national economy in Southeast Asia. In 2007, Thailand’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $520 billion, according to the International Monetary Fund. The country is currently classified as Lower Middle Income economy by the World Bank, with $3,732 GDP per capita.


3. THAILAND GDP PER CAPITA Thailand GDP per capita chart, historical data, forecast and news. Thailand is the second largest national economy in Southeast Asia. In 2007, Thailand’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $520 billion, according to the International Monetary Fund. The country is currently classified as Lower Middle Income economy by the World Bank, with $3,732 GDP per capita.

4. THAILAND INDUSTRIAL PRODUCTION Thailand Industrial Production chart, historical data, forecast and news. Thailand is the second largest national economy in Southeast Asia. In 2007, Thailand’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $520 billion, according to the International Monetary Fund. The country is currently classified as Lower Middle Income economy by the World Bank, with $3,732 GDP per capita.


5. THAILAND GOVERNMENT BUDGET Thailand Government Budget chart, historical data, forecast and news. Thailand is the second largest national economy in Southeast Asia. In 2007, Thailand’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $520 billion, according to the International Monetary Fund. The country is currently classified as Lower Middle Income economy by the World Bank, with $3,732 GDP per capita. Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when an government spends more money than it takes in. The opposite of a budget deficit is a budget surplus.


Trade Indicators: 1. THAILAND CURRENT ACCOUNT Thailand Current Account chart, historical data, forecast and news. The economy of Thailand is heavily export-dependent, with exports accounting for more than two thirds of GDP. Thailand exports mainly: gypsum, rice, shrimps as well as high-technology products like integrated circuits and parts, electrical appliances, and vehicles. Machinery and parts, vehicles, electronic integrated circuits, chemicals, crude oil and fuels, iron and steel are among Thailand's principal imports. Its main trading partners are: European Union, United States, Japan and China. Current Account is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically the most important part of the current account.


2. THAILAND BALANCE OF TRADE Thailand Balance of Trade chart, historical data, forecast and news. The economy of Thailand is heavily export-dependent, with exports accounting for more than two thirds of GDP. Thailand exports mainly: gypsum, rice, shrimps as well as high-technology products like integrated circuits and parts, electrical appliances, and vehicles. Machinery and parts, vehicles, electronic integrated circuits, chemicals, crude oil and fuels, iron and steel are among Thailand's principal imports. Its main trading partners are: European Union, United States, Japan and China. Balance of Trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported; a negative balance of trade is known as a trade deficit or, informally, a trade gap.


3. THAILAND EXPORTS Thailand Exports chart, historical data, forecast and news. The economy of Thailand is heavily export-dependent, with exports accounting for more than two thirds of GDP. Thailand is the world's second largest exporter of gypsum, leading exporter of rice and a major exporter of shrimp. High-technology products such as integrated circuits and parts, electrical appliances, and vehicles are now leading Thailand's strong growth in exports. Thailand’s main export partners are European Union, United States, Japan and China.


4. THAILAND IMPORTS Thailand Imports chart, historical data, forecast and news. Machinery and parts, vehicles, electronic integrated circuits, chemicals, crude oil and fuels, iron and steel are among Thailand's principal imports. Its main import partners are: Japan, China, European Union, United States and Malaysia.


5. THAILAND CONSUMER CONFIDENCE Thailand Consumer Confidence chart, historical data, forecast and news. Thailand is the second largest national economy in Southeast Asia. In 2007, Thailand’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $520 billion, according to the International Monetary Fund. The country is currently classified as Lower Middle Income economy by the World Bank, with $3,732 GDP per capita. Consumer confidence is a measure of the level of optimism consumers have about the performance of the economy. Generally consumer confidence is high when the unemployment rate is low and GDP growth is high. Measures of average consumer confidence can be useful indicators of how much consumers are likely to spend.


In Conclusion: Interest Rate Growth Rate -4.30% Inflation Rate -0.10% Jobless Rate 2.40% Current Account 2289 Exchange Rate 35.3800


Thailand 1.50%

Thailand in…. Recession Most of us have an intuitive idea of what a recession entails - job losses, plant closures and tough times for families. But what exactly is a recession? There are a few similar, but not identical definitions. To learn what economists mean by a recession What Causes Recessions? There are a number of theories on what causes recessions. Some observers believe each recession has a unique cause, whereas others believe recessions generally have a single cause, such as bad investments (malinvestment) by firms. It is occasionally heard that recessions and depressions, such as the Great Depression, are caused by stock market crashes. Others believe that globalization has changed the the nature of the business cycle. The economy and the stock market are closely related. Many people examine the stock market to find out how the economy is doing. It's long been known that if the stock market is in a period of decline, the economy is sure to follow. However there is little evidence that the stock market causes the economy to rise or fall. The stock market does not directly affect the economy. It is simply a mirror of people's generally correct beliefs about what is about to happen in the economy. The best way to understand this is to realize that a stock market index the Dow Jones Industrial Average (DJI) is simply a price. Because the value of index is a price, it only has two determinants: supply and demand. The report from Bureau of Trade and Economic Indices, Ministry of Commerce, show that Thailand economy slowdown.


Medium-run Leading Index is composed of seven leading indicators in January 2009 stood at 93.0 (2002=100) decreased 1.0 percent from previous month, because three of seven indicators decreased, from largest to smallest were construction areas permitted in Bangkok metropolis, USA Leading Index, and growth rate of broad money. There are four indicators increased were value of authorized capital of newly registered businesses, growth rate of Industrial Material Price Index, sign percentage inverted of Japan Leading Index, and sign differential inverted of average inter bank overnight lending rates. Nevertheless the six–month smoothed annualized growth rate decreasing by 11.6 percent. Short Leading Index is composed of six leading indicators in January 2009 stood at 110.0 (2002=100), increased 0.8 percent from previous month, because three of six indicators increased, from largest to smallest were value of authorized capital of newly registered businesses, number of foreign tourist and narrow money. There are three indicators decreased were stock exchange of Thailand index, real export value (in Baht term) and construction areas permitted in Bangkok metropolis. The six– month smoothed annualized growth rate decreasing by 6.3 percent. Coincident Index is composed of nine coincident indicators in January 2009 stood at 105.8 (2002=100), decreased 3.2 percent from previous month, because seven of nine indicators decreased from largest to smallest were production of beer, real import value (in Baht term), domestic sale of passenger & commercial cars, import duties, business taxes & value added taxes & specific business taxes, production of motorcycles, and production of commercial vehicle. There is an indicator increased was production of cement. The six–month smoothed annualized growth rate decreasing by 10.1 percent. Remarks: 1. Medium-run index have occurred before business cycle activity economy at 9 –11 months. 2. Short leading index have occurred before business cycle activity economy at 3 – 5 months.


3. The six-month smoothed annualized growth rate is obtained by dividing the current month’s index number by its average for the preceding twelve months and expressing the result as an annual rate. 4. All indicators have to be seasonal adjustment by X-12 and the indicators in term of value were real value indicators, which were adjusted by consumer price index. Forecast:

Thailand’s political scene will remain unstable in the forecast period owing to the persistent power struggle between, on one side, the established bureaucratic and royalist elites and the urban middle class, and on the other, the forces aligned with Thaksin Shinawatra, the former prime minister who was ousted in the September 2006 military coup.

The likelihood of further protests in the capital, Bangkok, is high. Although the People’s Alliance for Democracy (PAD, a right-wing alliance of royalists and business leaders) has ended its demonstrations, a pro-Thaksin group, the United Front for Democracy Against Dictatorship, has begun protests in an attempt to force the resignation of the new prime minister, Abhisit Vejjajiva.

Thailand’s relations with the US and the EU will remain troubled as a result of the Thai government’s unwillingness to criticise the ruling military junta in neighbouring Myanmar. Commercial disputes, particularly regarding the protection of intellectual property rights, will add to tensions with the US.

The Democrat Party-led government has responded to the global economic downturn with a stimulus package, but there are concerns that the measures will prove insufficient to counter a host of negative factors that are undermining growth prospects. Most of the measures announced by the government have focused on transferring cash to households through grants and tax cuts, but consumers may opt to save the additional income rather than spend it. There are also suspicions that some of the government’s policies are politically motivated.

The economy will contract sharply in 2009, as the global economic slowdown will have a negative impact on exports. Ongoing concerns about political stability will also continue to prevent a major improvement in consumer and


investor sentiment in the early part of the forecast period. However, as the global economy picks up, GDP growth in Thailand will accelerate to an average annual rate of 3.6% in 2011-13.

Global prices for crude oil and non-oil commodities will fall from the highs that they reached in 2008, contributing to a more benign outlook for inflation in the forecast period.

The current-account balance will return to surplus in the forecast period. Export growth will be particularly weak in 2009-10, owing to the economic slowdown in important export destinations, such as the US.

Key indicators Real GDP growth (%) Consumer price inflation (av; %) Budget balance (% of GDP) Current-account balance (% of GDP) Commercial banks' prime rate (av; %) Exchange rate Bt: US$ (av) Exchange rate Bt: ¥100 (av) •

2008 2.6 5.5 -1.2 -0.1 7.0 33.3 32.3

2009 -4.4 -1.2 -4.7 1.4 6.6 36.5 39.4

2010 1.8 2.7 -4.4 1.1 6.8 37.1 40.3

2011 2.8 1.9 -2.9 0.8 7.0 37.4 41.1

2012 3.9 2.4 -2.5 1.1 7.0 37.0 41.1

2013 4.2 2.4 -2.4 2.0 7.0 36.7 40.8

The Thai economy has in all probability already entered a technical recession, although Q1/2009 data have not been released.

The external outlook is grim with exports continuing to tumble at the start of the year, falling by 25.3% y-o-y in January 2009.

Manufacturing production has fallen in tandem with exports, registering a 21.3% contraction in the same month and the Bank of Thailand (BoT)'s business sentiment index, coming in at a subdued 36.3 (where 50 delineates expansion/contraction)

Although, the situation now is in recession already but it is not at the bottom of the recession yet.


Chapter 2
The sectors we decided to put our investment are energy and utilities, telecommunication and banking. The reasons of selecting each stock are based on the return, fundamental of company and financial structure. They will be explained more in details as follows: 1. Energy and Utilities Due to the poor economic situation around the world, the energy plays maybe pressured by lower oil prices but it is the very important source for the production of many industries. Therefore, when the economy turns to recovery, the energy stocks will rise again which are vary toward the economic situation and its own prices. At this moment, the foreign funds may still sell energy big caps on weak global demand further hitting commodity prices, but the energy stocks offer good value especially after the latest jump in oil prices. In this sector, we put our investment in PTT Exploration and Production Public Company Limited (PTTEP) and Banpu Public Company Limited (BANPU). 1.1 PTT Exploration and Production Public Company Limited (PTTEP)
Company Profile

The Company was incorporated on 20 June 1985 with the Petroleum Authority of Thailand (now PTT Public Company Limited or PTT) as the shareholders of 99.99% in accordance with the Cabinet’s resolution of 16 April 1985 for the Government to be able to hold petroleum concessions. And on 16 February 1988 the Cabinet gave resolution for PTTEP to conduct its business without having to comply with the orders, rules & regulations and the Cabinet’s resolutions that enforced general State Enterprises with exemption only to the resolution concerning the creating of the country’s debt of year 1985 and its amendment. This was for the Company to conduct its business independently with effectiveness and efficiency and be able to compete with other international oil companies. On 30 October 1992, PTTEP became a public company and was first trade in the market on 10 June 1993. There is change and significant development in 2008 PTTEP established 5 subsidiaries in international countries. PTTEP Bangladesh Limited (a subsidiary of


PTTEP) has entered into farm-in agreement for Blocks 17 and 18, located offshore People’s Republic of Bangladesh. PTTEP has swapped its 20% participation interest in the production sharing contract (PSC) in block M3 and M4 with CNOOC Myanmar Limited’s A4 and C1. PTTEP Australia Offshore Pty Ltd. together with Murphy Australia Oil Pty Ltd. (Operator) has entered into in the concession block WA-423-P in Australia. PTTEP SM together with Murphy Oil Corporation and INPEX Corporation has entered into the petroleum exploration block Semai II. PTTEP AB has signed the Share Sale Agreement to purchase 100% shareholders’ equity in Coogee Resources Limited.

Nature of Business As of 31 December 2008 PTTEP conducts its core business in petroleum exploration, development and production consisting of: Exploration and Production Projects • • • Thailand Projects: 15 projects Regional Projects: 16 projects International Projects: 11 projects Investment Projects • • • • PTTEP Petroleum Development Support Base PTTEP Gas Pipeline Investment Project Energy Complex Investment Project PTT ICT Solutions Project PTTEP’s policy is to manage PTTEP subsidiaries as “One Company” with the clear direction of its subsidiaries following PTTEP’s business direction and strategy and being managed as one team by PTTEP executives. In addition, the PTTEP management and internal control systems are also to be adopted and implemented in all PTTEP subsidiaries in the same way that they are standardized at PTTEP.


Ways to Make Profit (Strategic Direction) Exploring for, developing, and producing petroleum from domestic and international oil and gas fields, PTTEP strives to supplement value to business while responding to government policy on energy supply procurement to foster national energy security. Below are its three aspects of strategies and operating directions. Investment PTTEP’s focus is on investment expansion for sustainable growth through synergizing with other companies of PTT Group. The current push is for investment expansion in western/southern corridor countries, including Myanmar, Bangladesh, Cambodia, and Indonesia. In addition, its exploration focus is on countries with high petroleum potential and those in which it is already operating so as to continuously supplement value, including Algeria, Egypt, and Australia. As regards investment in E&P projects relying on the use of unconventional technology, its first priority is on using floating liquefied natural gas (FLNG) technology to develop stranded offshore gas. Another area of focus is to develop natural gas fields in Iran and a push for business expansion through mergers& acquisitions that align with its own strategies. Asset management Focusing on current asset value creation, PTTEP plans to maintain and optimize its production levels over longer periods while accelerating production development from assorted deposits to enable production start-up as planned. I In addition, it plans to maximize value from its international and JV projects.

To this end, PTTEP will focus on periodic revision and adaptation of project investment plans, accelerating or delaying them in alignment with suitable investments and time frames. To sustain project management under its strategic plans, PTTEP aims to accelerate its business procedures by focusing on synergy to define and develop projects in a holistic way while more efficiently allocating resources. It also strives to foster operational excellence by applying innovative techniques to aspects of projects. Capital project management ranks high at PTTEP to not only ensure timely project completion, but also manage costs and desirable project quality.


Organization capability development PTTEP’s plan focuses on instituting manpower requirement plan with clear business goals to sustain strategic plan implementation. To strengthen the organization, in 2009 PTTEP will speed up its structure leadership development program. Future Business Potential PTTEP corporate business targets during 2008-2012 and results of corporate strategy execution are summarized as follows: PTTEP sales volume target in 2008 was 223,334 Barrels of oil equivalent per day (BOED). PTTEP projected the sales volume for 2012 would be 251,778 BOED with the CAGR (Cumulative Average Growth Rate) at 6 %. PTTEP aims to maximize value from the existing projects and assets. PTTEP aims to constantly expand the investment both in domestic and overseas countries to enhance nation’s energy security. PTTEP aims to develop organization capability up to international standards in order to support current activities and long term growth. PTTEP aims to develop organization capability up to international standards in order to support current activities and long term growth


Expansion - Expected sales volume at 235,000 BOED in 2009 with 5-year CAGR at 6%. - Base line growth rate at 6% is based on existing assets and the execution of development projects in queue which does not include future M&A. Project MTJDA Vietnam 16-1 Algeria Period End of 2009 2011 2012




- Five year investment at Baht 418,000 MM mostly spent on development projects for future earnings contribution. - Concentrate in spending optimization and cost awareness in the near-term. - Continued commitment to earnings and returns, while maintaining high level of corporate governance. Financial Performance Balance sheet as of Year Ended 2008 Unit: Million Baht ASSETS CASH AND CASH EQUIVALENTS TRADE ACCOUNTS AND NOTES RECEIVABLE-NET TRADE ACCOUNTS AND NOTES RECEIVABLE-OTHERS 43,994.69 11,526.62 1,586.94




2,245.41 2,245.41 2,985.96 44,218.52 49,449.89 18,500.00 18,500.00 17,073.02 19,140.62 54,713.64 104,163.54 3,322.00 3,322.00 3,307.08 3,307.08 13,423.11 13,423.11 -2,281.15 119,654.78 17,232.20 332.20 16,900.00 102,422.58

COMPANY'S 134,103.83




Income Statement as of Year Ended 2008 (Unit: Million Baht)


12.62 12.62




-57.75 -50,276.64 573.74 -14,964.00 2,155.12 -12,235.14 228.86 19,981.95

Their Risk


There are two majors risks associated with the Company’s petroleum exploration and production result from internal and external factors. Internal Risk Factors such as New Project Investment Risks, Exploration Risks, Project Development Risks, Production Risks, Commercial Risks, Organization Capability Risks, Organization Capability Risks, Safety, Security, Health, and Environmental Risks. External Risk Factors such as Political Risks in Other Countries, Litigation Risks, Price Risks, Exchange Rate Risks, Interest Rate Risks

Expected Dividend

Capital Structure Statistics as of P/E P/BV Book Value per share(Baht) Dvd. Yield(%) Last Price(Baht) Market Cap. 29/12/2006 11.03 3.84 28/12/2007 19.96 5.44 30/12/2008 8.35 2.78 10/04/2009 7.86 2.44





2.79 96.50

1.95 164.00

3.05 107.00

5.47 99.00





As of 31 December 2008, PTTEP’s capital structure consisted of Baht 21,500 million liabilities and Baht 134,104 million shareholders’ equities. The liabilities to shareholders’ equities ratio were 0.16 times. Details of the capital structure are as follows:

Shareholders There are top 10 major shareholders as follow:





% of a total shares 65.55 1.74 1.72 1.52 1.36 1.35 1.04 0.98

1. 2. 3. 4. 5. 6. 7. 8.

PTT Public Company Limited Nortrust Nominees Limited HSBC (Singapore) Nominees PTE Ltd. The Bank of New York (Nominees) Limited Little Down Nominee Limited Thai NVDR Company Limited Chase Nominees Limited 42 State Street Bank and Trust Company for London BNP Paribas Securities Services Luxembourg State Street Bank and Trust Company

2,167,500,700 57,396,052 56,950,751 50,352,100 44,871,000 44,683,678 34,338,400 32,487,911







Major shareholder who has significant influence on determining company policy or the operation of business is PTT has nominated any person and the management who possess the qualification in accordance with the company criteria for election as a director or the chief executive officer.



PTTEP’s core business lies within the Exploration and Production (E&P) industry. PTTEP sources and supply natural gas, condensate, crude oil or LPG primarily to Thai market. The competition level within the E&P industry in Thailand can be regarded as non-threatening. This is due to the nature of the market where demand usually exceeds supply. The types of contract utilized are usually done so in long-term, where conditions stipulate take-or-pay clauses, minimizing any losses which may occur. Despite the current economic slowdown which may prolonged throughout 2009, consequently affecting the domestic energy demand. The previously mentioned ensured that the products will be sold in the volume agreed, when the contract was signed. Leaving the current output and sales close to those seen in 2008, and will likely, if any, affected by the economic slowdown. Regarding the medium to long-term market, the demand for petroleum products will continue to grow. It is PTTEP’s commitment to search and source new energy supply from both domestic and international sources to meet the growing demand. Figure 1.1.1


From figure 1.1.1, it showed that during the mid of year 2008, the highest price of PTTEP was about 200 Baht/share. The other companies in the same sector also have the high price at that period due to the increase of oil price showing in figure 1.1.2 below. But at Q1 of 2009, the price of PTTEP dilute to approximately 95 Baht/share. It is an opportunity to buy PTTEP at the cheaper price. When the economic get back to normal, we can make the profit. Figure 1.1.2

PTTEP may be the only stock in this sector that showed an outstanding profitability even we expected that the profit would decrease related to oil price down trend. Most oil analysts still believe oil price could move up to $50 per barrel by April 2009 as most oil inventory are on declining. If the oil price increases, it will have the good effect toward the price of PTTEP stock. Figure 1.1.3


From figure 1.1.3, the results of operations for year 2008, PTTEP’s total net profit of Baht 41,675 million or Baht 12.68 per share-diluted, an increase of 46% when compared with 2007’s net profit of Baht 28,445 million or Baht 8.66 per sharediluted. The increase was mainly due to higher sales of petroleum, resulting from the higher average petroleum sales price and higher sales volume for the year 2008. However, hope for the rebound of economies, especially of the US after Fed has injected additional money into its economic system via debenture buying in order to boost liquidity, was the factor that helped support global oil price to swing continuously. So, we should buy on weakness. Figure 1.1.4

From figure above, it showed that PTTEP’s graph is very sensitive toward the Set Index.
1.2 Banpu Public Company Limited (BANPU)

Company Profile Banpu was established in Thailand in 1983 as a coal-mining venture and was later listed in 1989 on the Stock Exchange of Thailand. In the 1990s the Company diversified into power project development in Thailand, Coal mining in Indonesia, port operations and industrial minerals. Since 2001 Banpu has decided to focus its strategy around becoming a leading coal-based energy player in the Asia-Pacific region. The decision is based on where the Company sees its core skills and competitive advantages – as well as where it sees most growth potential. This decision has led to some non-core divestments (industrial

minerals, port business, some non-coal power investments…) as well as further growth in coal – in Indonesia and China. • • • • 1983 BanPu Coal Company Limited was founded by the Vongkusolkit family and the Auapinyakul family with the registered capital of THB 25 million. 1989 Listed on the Stock Exchange of Thailand. 1993 The Company has changed its status to Public Company Limited and increased its registered capital to THB 1,000 million. 1995 Tri Energy Company Limited or TECO was formed as a joint venture by the Company, Texaco Inc. and Black & Veatch to bid for a power plant under the Independent Power Producer (IPP) Scheme of EGAT. • • • • 1997 TECO signed a Power Purchase Agreement (PPA) with EGAT and started the construction of its power plant. 1997 TECO signed a Power Purchase Agreement (PPA) with EGAT and started the construction of its power plant. 1998 Universal Coal Company Limited was renamed 'Banpu Terminal Company Limited'. 1999 The Company raised THB 600 million by issuing and offering 600,000 debentures to shareholders at THB 1,000 each.

Nature of Business Banpu has two core and complementary business lines - coal mining and coal-fired power generation: Coal Banpu has demonstrated core competence and competitive advantages in the costefficient development and operation of open-pit coal mines in Asia - and in both domestic and export grade thermal coal market. Power Banpu has been a pioneer in the successful development of IPPs and SPPs in Thailand. The Company now intends to use this experience and expertise to develop a


business line of coal-fired power that is both complementary to and synergistic with its coal mining business. BANPU: Group Structure


Ways to Make Profit In 2008, Banpu continued to sell coals to markets which offered the highest price. It also focused its efforts in keeping long-term customers and increase customer satisfactions. Banpu’s major competition strategies are as follows: • Customer relations management

Realizing how important to respond to customer demands, Banpu has set up a unit to manage its relationships with customers. The unit interviews major customers of Banpu by sending questionnaires to measure their satisfactions towards the Company’s products and services. Results of the survey are later used to improve Banpu products so that we can respond more to their demands. • Customer satisfaction

Results of customer satisfactions are used to improve Banpu internal work process so that they can timely respond to customer demands and to increase their satisfactions. • • • • • Reliability and stability in coal delivery Improving coal terminal. Expansion of coal stockyard at the Bontang Coal Terminal. Improving the barge circuit network. Delivery flexibility

With a coal terminal of their own, Banpu therefore can offer flexibility for customers who want to berth their own barges at banpu terminal. This not only facilitates customers by allowing them to rent their own barges or to change them but it also helps customers to better manage their barges and their transportation costs. • Speedy service

Banpu has installed a computerized system to monitor its production, coal transportation and documentation such as invoices, cost calculation and coal quality information so that they can track a status of goods and services offered to each customer. This in turn helps Banpu respond more quickly to customer’s needs while reducing documentation errors, which should help reducing customer’s costs and times spent on communicating with each other.


Technical supports

The Company has hired coal utilization experts to offer advice and assistance to customers so that they can use own coal more efficiently, which should therefore reduce their costs. • Sophisticated quality control system

The Company has upgraded its quality laboratories at every mine and standardized its coal quality analysis manual to ensure that not only all of own labs will operate on the same standards but also run according to international standards. In addition, Banpu also sets up a quality control unit to monitor the quality of own coal at every production stage until the product is in customer’s hands to ensure that the coal delivered to customers is constant in terms of quality and is in line with all the terms and conditions previously agreed. • Selling more high-ended products

The Company has combined medium-quality coal having low level of sulfur and ash with high-quality coal. The end result is high-quality product that can be sold in the market at a higher price, which in turn, expanding Banpu high-price product ranges. • Focusing on long-term customers

The Company continues to focus at maintaining our long-term relationship with customers. This has allowed Banpu to have a lot of long-term customers whose purchases cover most of coals sold by Banpu. Although some customers may not sign a long-term coal purchase agreement with Banpu, they continue to buy coals from Banpu on a regular basis. • Geographical spreads

The Company’s major customers are spreading in various countries both in Europe and Asia to reduce Banpu dependency risk in having to overly dependent on one market over another. Besides, when one market has a problem, they can still switch own effort to other markets that are still free from trouble. This in return helps stabilize Banpu incomes.


Their Margin Banpu Public Company Limited (BANPU) reports its financial performance for the 2008 fiscal year, recording a net profit of THB 9,228 million, an increase of THB 2,573 million or 39 percent from the previous year, thanks to the sound performance of coal business which was boosted by favorable average selling price of USD 72 per tone, 75 percent higher than that of 2007. Net profit of THB 9,228 million consisted of THB 6,326 million from coal business and THB 2,902 million from power business, accountable respectively for 68.5 percent and 31.5 percent of the total earning. As of 31 December 2008, Banpu total assets were THB 89,362 million, an increase of THB 24,311 million or 37 percent while total liabilities stood at THB 43,828 million, an increase of THB 17,274 million or 65 percent compared to the year 2007. Net Debt to Equity ratio as of 31 December 2008 was 0.36 times compared to 0.14 times in 2007. Earnings per share (EPS) for the year 2008 were at THB 33.96 per share, an increase of 39 percent from THB 24.49 per share in 2007. Future Business Potential In 2008, Banpu revised its vision and mission statements to be in line with the current business direction, status and current market conditions. Its newly-revised vision is as follows: To be an energetic Asian energy provider of quality products and services and be recognized for its fairness, professionalism and concerns for society and environment. Its newly-revised five missions are as follows: • To develop businesses in the fields of energy in pursuit of Asian leadership position. • To diversify and invest in strategic businesses to enhance competitiveness. • To provide varieties of quality products and services with commitment, reliability, and flexibility. • To conduct business in a socially, ethically and environmentally responsible manner.


• To build sustainable value for shareholders, customers, business partners, employees, local communities, and to be a good citizen to host governments. During the past year, the Management submitted a strategic plan for the next five years (2009-2013) after the current strategic plan ended in 2008 in order to lay down business directions. Banpu will pursue, to evaluate risks and to prepare the Company into a business direction under future circumstances. • Care for occupation health and safety of employees and contractors by taking all practical and reasonable measures to eliminate fatalities, injuries and occupational illnesses. Expansion Future business expansion, in accordance with its target goal to become a leading Asian company in the energy Business in the Asian region, with core business of coal production and power generation, Banpu has strengthened its organization by concentrating in the development of human resource, operating system and process, new management technique for generating added value for the organization and the shareholders and improvement of management structure in coping with the competition in the future. • Thailand's coal mine and energy firm Banpu plans to acquire controlling stakes in power plants in both Australia and India as well as to purchase an additional coal mine in Indonesia.

Interest in the power plants in Australia and India, the company plans to purchase the coal mine in Indonesia as part of its coal-mine business expansion. It currently has five coal mines in Indonesia and two in China.


Financial Performance Summary of financial performance in 2008 Net earnings increased 39 per cent from THB 24.5 per share in 2007 to approximately THB 34 per share in 2008 – or in absolute terms from THB 6,654 million to THB 9,228 million. Total dividends for the year have been announced at THB 12 per share, up from THB 8.5 in 2007. Banpu’s EBITDA1 increased 80 per cent to THB 18,772 million in 2008. In contrast to the previous year, the Company’s coal business accounted for over three quarters of total EBITDA in 2008 at THB 14,720 million. The Company’s EBIT was up 89 per cent at THB 16,951 million. The earnings performance was driven primarily by the strength of the coal market and a higher share of AACI’s earnings in the second half of the year, post-acquisition. The EBIT for their coal business increased by more than three times to THB 13,350 million in 2008, while the power business EBIT fell to THB 3,601 million. Coal business earnings growth was achieved in spite of a slight fall in production thanks to higher coal selling prices, up 75 per cent to an average of about USD 72 per tonne versus USD 41 per tonne in the previous year. Total equity income from the China coal business for the year was THB 1,781 million, including 56 per cent of Daning’s earnings from July onwards. Inevitably, higher coal prices had the opposite effect on earnings from Banpu’s Power Business. BPIC’s EBITDA fell 55 per cent to USD 17.9 million while equity income from BLCP fell 22 per cent to THB 3,165 million. Profit & Loss (Bt m) FY Ended December Sales Cost of Sales Gross profit SG & A EBIT DEP re. & amorth 2006 33,378 20,838 12,541 4,056 4,541 3,492 2007 32,442 20,964 11,478 5,144 3,088 3,393 2008 50,530 28,110 22,419 6,192 10,691 1,821 2009F 59,413 33,050 26,362 7,130 13,291 4,866

2010F 57,684 32,583 25,101 7,499 11,834 5,879

EBITDA Interest expense Other income Pre-tax profit (loss) Corporate tax After - taxprofit ForexGain (loss) Extraordinary Items Gn (Ls) from affiliates Minority interest Net profit Norm. net profit

8,033 1,181 891 5,052 1,122 3,929 -186 0 801 134 3,610 3,796

7,027 1,307 803 7,089 1,492 5,597 -361 1,687 4,504 269 6,654 5,328

12,512 1,391 1,391 15,660 3,763 11,892 383 -1,742 4,946 1,333 9,228 10,559

18,158 1,698 1,604 16,412 3,282 13,129 0 0 3,214 3,476 9,654 9,654

17,713 1,404 1,557 16,052 3,210 12,841 0 0 4,064 3,088 9,753 9,753

As seen below, the profit and loss table showed the net profit would increase every year from 3,610 m. Baht (2006) to 9,753 m. Baht (2010F). The Group’s activities expose it to a variety of financial risks, including: Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to US Dollars. Entities in the Group use forward foreign exchange contracts and currency swaps contracts, transacted with Group Treasury, to hedge their exposure to foreign currency risk in connection with their measurement currency. Group Treasury is responsible for hedging the net position in each currency by using currency borrowings and external forward foreign exchange contracts or currency swap contracts. Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in market interest rates. All interest rate derivative transactions are subject to


approval by the Financial Management Committee before execution. The Group’s policy is to maintain borrowings in both fixed and floating rate instruments. Coal price fluctuation risk The Group is exposed to coal price risk from substantial fluctuations in coal price. The Group uses coal swap contracts to minimise its exposure to fluctuations in coal price in it business operations, both in Thailand and overseas, and maintains on emphasis on a balance of overall coal price in the Group by entering into both shortterm and long-term sales agreements. Credit risk The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of goods and services are made to customers with an appropriate credit history. Derivative counter parties and cash transactions are limited to high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business, Group Treasury aims at maintaining flexibility in funding by keeping credit lines available. Expected Dividend and Capital Structure
Statistics as 29/12/2006 of P/E P/BV Book Value per share(Baht) 15.65 2.54 28/12/2007 18.59 4.29 30/12/2008 6.54 1.58 10/04/2009 6.51 1.48






Dvd. Yield(%) Last Price(Baht) Market Cap.





182.00 49,458.11

400.00 108,699.14

228.00 61,958.51

221.00 60,056.28

Major Shareholders Major Shareholders 1. The Vongkusolkit Family and related companies* 2. Thai NVDR Co, Ltd. 3. State Street Bank and trust Company 4. Littledown Nominees Limited 9 5. State Street Bank and Trust Company for London 6. Chase Nominees Limited 7. HSBC (Singapore) Nominess Pte. Ltd. 8.Government of Singapore Investment Corporation C 9. Norbax Inc, 13 10.Fortis Global Custody Services N.V. Number of Shares Hold 43,019,741 32,178,013 18,813,170 13,723,000 6,748,210 6,041,000 4,443,213 4,292,600 3,853,035 3,500,000 Percentage 15.84 11.84 6.92 5.05 2.48 2.22 1.64 1.58 1.42 1.29


Summary of Yearly Earning (2006-2008 and 2009F-210F) Year End Dec 31 Sales (Btmn) EBITDA (Btmn) Normalised earnins (Btmn) Earnings (Btmn) EPS (Bt) PER (x) EV/EBITDA(x) Free cash flow (Btmn) CF/share (Bt) BVPS (Bt) P/BV (x) DPS (Bt) Dividend yield (%) Net debt/equity (x) ROA (%) ROE (%) 2007 32,442 7,684 5,328 6,654 24.49 8.8 8.3 665 4.8 126.3 1.7 8.5 3.90% 0.2 10% 24% 2008 50,530 13,775 10,559 9,228 33.96 6.4 5.4 7,141 29.2 149 1.4 12 5.60% 0.4 10% 25% 2009F 58,700 14,277 9,579 9,579 35.25 6.1 4.1 9,088 16.9 170.2 1.3 14 6.50% 0 10% 22% 2010F 60,861 14,195 9,452 9,452 34.78 6.2 3.6 11,444 29.8 191 1.1 14 6.50% Cash 10% 19% 2011F 71,027 16,477 11,153 11,153 41.04 5.3 2.6 9,989 24.8 218.1 1 14 6.50% Cash 10% 20%


Banpu in 2008 consolidated net interest and dividend income was Baht 50,530 million, increasing by Baht 18,088 million, over 2007.

Conclusion During the downtrend in coal price and the global financial crisis, BANPU has a healthy financial status with net cash in 2008 of Baht 12.9 bn. The benefit to its 2009 earnings from its coal swaps contracts. At the current spot price, the gains from these swaps are roughly Baht 4.5 bn, which should help protect its earnings from further decline in coal prices. BANPU coal sales are forecasted to be increased gradually as figure 1.2.1.

Figure 1.2.1

According to management, the negative factors facing the coal market, such as weaker demand for coal due to the poor economy and swing supply from


metallurgical coal entering the global thermal market, should be offset by positive factors, especially lower exports from some export countries. The coal market will be supported by growing the demand in India and Indonesia as well as China. In China, the current domestic coal price is higher than the international price, which induces more import of coal to the country. The Chinese government continues to close small and unsecured coal mines, so supply to the China market should be trimmed and export would be lower.

Figure 1.2.2

From figure 1.2.2, the historical chart showed that the stock price of BANPU used to reach the highest price at 500 Baht per share during the mid of year 2008. It is the same stories as PTTEP as mentioned previously. Currently, the price of stock falls to approximately 200 Baht per share. It is very cheap to invest in it. The stock price will vary according to the economic situation. When the economic is good, the consumption will increase. It leads the price to go up rapidly. It is the way to make money from this.


Figure 1.2.3

In July 2008, the coal price jump up at the highest point as shown in figure 1.2.3. It was the same period that the stock price of BANPU reached the highest price too. An 11.4% WoW decline in spot coal prices should impact the share price performance in the short-term. The downside for prices should not be large. The high cost producers will drop out of the market. BANPU coal mines have relatively low cash production costs compared to others, which will allow it to weather the current storm. There are 2 events support a rebound in coal prices. 1) 2) Indonesia (a major coal producer) announced cutting exports this years by 22% to 162mn tons. China coal imports reached a recent peak of 4.88mn tones in February 2009 on industrial and construction. Coal is the lowest cost of production and energy source in many industries especially in the heavy duty industry but it is the cause of pollution. In addition, BANPU has the mining business in Indonesia and China. BANPU will spend a total of US$208mn in 2009 to develop three coal mines in Indonesia and China to maintain growth. BANPU have the sustainable fundamental and healthy financial status. Therefore, we should invest in BANPU at this time when the stock price is inexpensive. 2. Telecommunication


There are plenty of growth opportunities in Thai market especially at rural market which is the key growth area for the Thai telecom industry. It is estimated that telecoms spending is approximately 2% of GDP. The telecommunication helps people to get connected and very necessary in everyday life. So, even the economy slowdown, but people still need to communicate. With the rising of oil price, the mobile phone could be seen as a low-cost alternative for the business traveler. In this environment, people are becoming more price-sensitive and have low brand loyalty. There will be high competition in this sector. In this sector, we invest in Advanced Info Service Public Company Limited (ADVANC) and Thai Com Public Company Limited (THCOM). The reasons of selection will be elaborated as follows:
2.1 Advanced Info Service Public Company Limited (ADVANC)

It is the largest mobile operator in Thailand and was established in 1989. AIS:

No.1 Thailand mobile operators, both in terms of subscribers and revenue market shares

 

The largest network coverage with over 14.000 cell sites nationwide Successfully developing three distinctive brands targeting different customer profile.

 

Maintain market share leader both in city and rural areas. Strong dividend payment with low debt profile. The company owns 46% share of the subscriber market share and more than

97% nationwide coverage. AIS is a publicly listed company in the Stock Exchange of Thailand (SET) since 1991. As of 2007, the company’s market capitalization of approximately Baht 287 billion (US$ 8.6 billion) is among the top five listed companies on the SET. Major Shareholders of the company:


The company’s major shareholders are 42.67% Shin Corporation Plc. and 21.34% SingTel Strategic Investments PTE Ltd. and 35.95% free-float which are owned by institutional and retail investors. AIS also operates 1800 MHz GSM network through its subsidiary, Digital Phone Co., Ltd. (DPC). DPC operates under a 16-year BTO contract from CAT Telecom Public Company Limited (CAT), started from 1997 to 2013. DPC also has a network roaming agreement with AIS to enable nationwide service to the GSM 1800 customers as well as to the GSM advance customers to provide better network service quality for both networks. Services of the company: AIS main services include both prepaid and postpaid services. Prepaid subscribers make up 91% of the total subscriber base with postpaid subscribers accounting for the remaining 9%. In revenue terms, prepaid subscribers contributed 66.4% while postpaid revenue was 24.1%.

As of year end of 2007, AIS has a total of 24.1 million subscribers Subscribers (Million) ARPU (Baht)

Prepaid Postpaid Total

21.8 2.3 24.1

227 744 279

66.4% of revenue was from prepaid service


Breakdown of revenue % Prepaid Postpaid Other Total 66.4 24.1 9.5 100.0

Prepaid and postpaid services:

Smart Life from GSM advance: “Choose it right, Live life the way you desire" released with revitalizing and recolor brand and logo and service modes featuring Mix & Match that reflects customer’s style.

Postpaid subscription service targeting young workers, businessmen, urbanites, tech-savvy, and quality-oriented customers. Smart Life from GSM advance is the brand that harmoniously combines EQ and IQ to reflect personalities of new generation blessed with creativity in not only technology but also transforming lifestyle full with enthusiasm, livelihood and trendsetting behavior. • GSM 1800:


Postpaid subscription service focusing on simplicity and basic voice communication.


Prepaid service targeting teens and youngsters who thrive on having individual styles and expressing their creativity. • Sawasdee:

Prepaid service targeting upcountry customers, first-time users, and those who need longer validity dates at affordable prices.


Dividend DPS

Dividend 2007 6.3

2008 6.3*


Payout Yield

114% 6.5%

114% 8.2%

Dividend for the year 2008 is at Baht 6.3 per share and the yield is 8.2%.

Financial Data:
Period as of Y/E '05 31/12/2005 Y/E '06 31/12/2006 Y/E '07 31/12/2007 Y/E '08 31/12/2008

Financial Data Assets Liabilities Equity Paid-up Capital Revenue Net Profit EPS(Baht) Financial Ratio ROA(%) ROE(%) 24.04 27.49 19.82 22.09 19.39 21.46 20.60 22.20 119,013.89 47,932.77 70,209.27 2,950.64 93,139.03 18,908.51 6.42 134,300.77 56,701.76 76,937.95 2,953.55 92,490.64 16,256.02 5.50 128,941.65 53,480.85 74,884.30 2,958.12 109,115.64 16,290.47 5.51 128,081.29 54,645.64 72,923.06 2,961.74 113,356.64 16,409.04 5.54


Net Profit Margin(%)





Ordinary Shares:
Symbol Exchange Authorized Capital Paid-up Capital Mkt. Cap (Btm) Free Float (%) Avg. Daily Vol.(‘000) Foreign Limit 48.30 % 2,961,739,547 Baht 245,824.38/ 8,706 (As of 24 Sep 2008) 35.99 (As of 18 Sep 2008) 5,447 ADVANC SET(Stock Exchange of Thailand) 4,997,459,800 Baht

Ways to Make Profit:
1. In order to help their customers solving problems related to billing and service

experience, AIS operates its own call center business through its subsidiary, Advanced Contact Center Co., Ltd. (ACC). With over 2,200 well-trained call center staffs, the Company is able to provide superior service quality to its 24 million subscribers. Call center is turning into the key differentiator for the Company as its services has been evolving from simple after-sales problem solving related to billing and service experience to undertaking more proactive and customer-oriented approach in promoting new marketing campaigns and suggesting new products and services to both existing and new customers. 2. International telephone service: Company commercially launched its new business to provide international telephone service under AIN GlobalComm Co., Ltd. (AIN), a wholly owned


subsidiary of AIS. AIN is awarded a 20-year license ended in 2026 from the National telecommunications Commission (NTC), which allow them to service through its own international gateway facility.
3. mPay business:

Mobile payment business under Advanced MPAY Co., Ltd. (AMP), a joint venture between AIS with 69.99% and NTT DoCoMO with 30% shareholding. AMP received a license from the Bank of Thailand to provide payment services based on the electronic cash card under “mPAY” brand. mPAY enables AIS’s customers to conveniently and securely engage in various financial transactions via mobile phones. Services cover many daily-life transactions including online shopping, bill payment, recharge of prepaid phone credit as well as payment for goods and services. 4. AIS also invests in a 99.99% owned subsidiary, Wireless Device Network Co., Ltd. (WDS), to run sales and distribution of handset, SIM card and refill card, previously undertaken by DPC, another subsidiary. The handset sales and distribution business in its nature has very thin margin. AIS operate this business as a strategic move for company to be able to influence the handset market in term of handset models that support the Company’s new service applications. Expansion of the business: • AIS is looking to expand its business into fixed lines area focusing on providing data services as oppose to the traditional voice service.

Technology that support the use of 900MHz for upgrading to HSPA (High Speed Packet Access) from the 2G GSM technology, which will allow higher data speed comparable to 3G. This development is considered under the existing BTO contract that AIS has with TOT. The initial investment cost is estimated around 5-7 billion Baht.


The business is expected to run through its 99.93% subsidiary, Super Broadband Network Co., Ltd. (SBN).

The Company is also interested in applying for a license to operate WiMAX. WiMAX or “worldwide interoperability for microwave access technology” enables wireless broadband connectivity over wireless metropolitan area network. WiMAX will allow the Company to tap into residential broadband market without laying expensive and time-consuming physical connections to houses. It will also allow flexibility in expansion of cellular network in some areas.

Launching of the 3G iphone as to attract the new and fast generation of the youngsters and also smart businessmen in order to help them communicate conveniently and also explore new information effectively to adapt to the fast and technological world. The company expects 3G to help enhance variety of services through introduction of various applications such as internet, email, multimedia, music/video downloading, instant messaging, and other capacitydemanding applications. AIS is considering applying for a 3G license once the National Telecommunications Commission (NTC) finalizes and issues the 3G licensing framework and criteria. The total investment expenditure for 3G network is estimated at Baht 20-23 billion per annum for the first 2-3 years, with primary interest in WCDMA technology using 2.1GHz radio spectrum.

Radio-frequency identification (RFID) is an automatic wireless identification method, relying on storing and remotely retrieving data using devices called RFID tags or transponders. Customers use their mobile phones to pay for subway and purchase goods and services.


AIS expects that this technology will help promotes a Mobile-Commerce business. This will help the Company promotes its subscribers to utilize mPAY service as well as to encourage the non-mPAY users to try the service. Risk: • There is a risk of 3G frequency allocation to be delayed as the formation of the National Broadcasting Commission (NBC) has not yet materialized.

Under the Frequency Allocation Act 2000, new frequency allocation must be approved by a Joint Allocation Commission comprising members from both the National Broadcasting Commission (NBC) and the National Telecommunications Commission (NTC). Without NBC, the Joint Allocation Commission could not be formed. • User terminals that will support HSPA on 900MHz spectrum are currently limited in numbers and lack of variety. Going forward, if equipment vendors have limited supply of such type of terminals, implication is that retail price could be more expensive. To run HSPA on 900 MHz will require careful network design and planning. • There is a risk on regulatory uncertainties e.g. frequency allocation, licensing fee, and the obligations on the operator that contained within it. Therefore, the Company would require a thorough study on regulatory requirement for WiMAX license as well as a consumer demand before making investment decision. Conclusion ADVANC financial status gives them advantages over peers in this soft economic period. The company can maintain marketing spending in order to strengthen competitiveness and improve the brand, while peers may need to control expenses in a poor economy this year. Also, ADVANC announced a 2008 dividend of BT 6.30/share, implying a generous yield of 8.2% at the current share price.


The key investment features of ADVANC are as follows: - High dividend payout - Strong capital structure - Sustainable operating cash flow - “A” rating from S&P and “AA” rating from TRIS - Good corporate governance - Management team with proven track record Figure 2.1.1

From figure 2.1.1 showed that ADVANC’s price reduce to the support line between 75-80 baht/share. It reflects the poor economic situation but the sales volume does not reduce following the current condition. So, we buy now and speculate the price to go up and sell to get the margin.


2.2 Thai Com Public Company Limited (THCOM) Company profile Thaicom Public Company Limited (formerly named Shin Satellite) was founded on 7th November 1991 by Shin Corporation Plc. (“SHIN”), which was granted a 30-year Build-Transfer-Operate concession from Thailand’s Ministry of Transport and Communications (now transferred to “Ministry of Information and Communication Technology”) to operate the country’s first communications satellite. The concession expires in 2021. The Company has been a publicly listed company on the Stock Exchange of Thailand (“SET”) since 1994. Later in April 2008, the Company has changed its name to “THAICOM Plc.” using the new ticker symbol on SET as “THCOM”. Until present, THAICOM Plc. has launched five communications satellites in geosynchronous orbit including THAICOM 1A, THAICOM 2, THAICOM 3 (deorbited), THAICOM 4 (IPSTAR) and THAICOM 5. THAICOM Plc. has built not only the world class satellite platforms, but also high quality satellite service facilities besides its main earth control station, namely “THAICOM Teleport and DTH Center”. The THAICOM Teleport and DTH Center has also been certified ISO9001:2000 since 2002. The Company continues to renewal ISO certification when expiring, to guarantee the international standard services to the customers. Innovations have brought global attention to focus on THAICOM Plc. The Company was the first in the region to offer Ku-band, Digital Direct-to-Home broadcasting as well as the world’s first operator to employ MPEG-2/ DVB compression since 1994. With the success of the THAICOM satellite projects, THAICOM Plc. has foreseen the potential of a new generation of Internet Protocol (IP) satellites and set up the project called “IPSTAR”. IPSTAR is the world first broadband satellite which fully supports telecommunications via Internet Protocol (IP). IPSTAR technology has been developed since 2000 to increase the capacity for efficient use of bandwidth and to reduce the service cost to a lower level than that of other satellites as well as allowing fast rollout of two-way high-speed satellite broadband system. According to the IPSTAR initiative, the Company received the “Industry Innovator Award for Technology Development and Applications” in 2006

for the IPSTAR Technology from the Society of Satellite Professionals International (SSPI). Currently, THAICOM Plc. operates four types of businesses including satellite transponder leasing and related services, internet-related services, telephone-related services (overseas), and telephone directories and distribution. With experiences and successful records through out these years, THAICOM Plc. intends to continue the satellite businesses with the premise since establishing, to bring the advance satellite technology for the benefit of the region, to link communications network across the region, and to promote equal opportunities for everyone for the usage of the satellite.

Nature of Business Product & Service Transponders Leasing Service First and foremost, Thaicom provides customers with C-band and Ku-band transponder capacity for full time or occasional use. This can support Telecommunications Trunking, VSAT, Satellite News Gathering (SNG), Analog TV, Digital DTH, and High Definition TV. In addition, a number of C-band and Ku-band transponders on THAICOM satellites are allocated for occasional short-term video transmission applications such as live television of special events (sports, concerts, news, contests, conferences, etc.), program transmission or backhaul services and SNG.


1. Telecommunications Trunking Service Telecommunications Trunking Service The company provides transponder capacity to mobile telecommunications companies that enable them to transmit signals between local exchanges (Base Station Transceivers - BTS) and their main operations sites (Base Station Controllers - BSC). Without the requirements to set up terrestrial lines, this is a very cost effective solution for customers to expand their networks to the remote areas where the satellite will be the alternative means to pass signals from the local to the main exchanges.

2. VSAT / International VSAT Owing to their large coverage area and insensitivity to distance and terrain, satellite are an effective medium for high speed cross-country links for corporate international private networks and inter-network connections. Thaicom provide private VSAT links to corporate users in several countries enabling their local subsidiaries to communicate and coordinate with their headquarters and among


themselves in a more efficient and cost-effective manner. The Thaicom global beam is so vast that VSAT links can now reach hundreds of countries on the four continents it covers.

3. Rural Telephony Countries can no longer afford to have sections of their population cut off from communications with the outside world, but all too often they cannot keep pace with demand. The lack of basic communications in rural areas seriously detracts from the quality of life of the populations. It is telecommunications that becomes the


critical catalyst for encouraging the growth of local extractive, agricultural and manufacturing industries, as well as rural business and tourism. However, the distance from centers of population has been a prime factor impeding the progress of bringing telecommunications to these areas. In these remote regions, rural telephony can be the ideal solution for providing a communications infrastructure that can be the backbone for economic development. In addition, rural telephony represents significant business opportunities for telephone service operators. A satellite is a cost-effective platform to support a rural telephony service since its cost is insensitive to distance. To further advocate rural telephony, Thaicom can provide a technologically advanced, rural telephony network on a turnkey basis. That is, the Company can take care of every aspect of network installation to ensure the customers are satisfied with the network, reducing costs and providing more telephone connections to people in rural and remote areas.


4. Occasional Service The occasional service is widely used by covering breaking news, live sports events, concerts, and other special events. To meet up with the customers’ demand, the company can offer a very flexible deal of ad-hoc or occasional services under a short-term contract ranging from minutes to weeks or even months. In addition, the company has provided one stop shop services for SNG leasing, fiber, or microwave through our local and global partners both for domestic and international services.


Occasional Service Configuration

Video Broadcasting Service 1. Teleport Service A teleport, or telecommunications port, is a centralized location providing access to advanced bandwidth services. Thaicom built a world-class teleport center in 1994 and is located at Lad Loom Kaew, Pathumthani Province, Thailand. The Thaicom Teleport and DTH Center contains very modern equipment and facilities to support any requirements for domestic or international satellite broadcasting services. Source signals and programs originating in Thailand can be pre-processed at the customer's premises and sent to our teleport via fiber optic cable or microwave.

The establishment of the facility comes from the digital Direct-to-Home (DTH) network expansion of cable TV operators. The facility extends from domestic

to international services and supports any of the services relating to THAICOM transponders. This facility can handle a complete range of transmission services for hundreds of digital and analog TV channels. Thaicom bundles services from the facility with THAICOM transponders to provide a one-stop service for broadcasting customers as well as coordinating with other suppliers on the end-to-end basis. Teleport services include:
• •

Uplink and Downlink Studio and Tape Play Facilities – The preparation and broadcast of live or recorded programming Digital signal compression Satellite Turnaround – Signal collection from one satellite for transmission to another satellite Conditional Access Satellite News Gathering – Mobile signal transmission service High Definition Television (HDTV) Transmission Service

• •

• • •

With ground equipment facilities, customers can uplink directly to a Thaicom satellite for turnaround at the teleport in case when a transmission needs to be sent to another satellite. Without uplink facilities, customers can send program tapes to the teleport for playback and transmission via Thaicom satellites. Our teleport provides many related services and facilities to its customers such as video conferencing system, television studio and post production equipment. 2. Direct-To-Home (DTH) Service Thaicom offers a digital signal compression and transmission services via satellite directly to residential customers. Digital video compression technology can reduce video transmission costs to the broadcasters. In addition, viewers can use small antenas (sub-meter) to receive the digital channel directly.


With a wide range of services to direct-to-home operators including uplink and downlink programs using their own equipment or using Thaicom's “Thaicom Teleport and DTH Center”, digital compression, digital broadcasting, subscriber management with encryption and conditional access service, satellite transponder capacity and the return path for transactional or interactive services are available. Thaicom’s services enable its customers to provide various content and channel options to their direct-tohome viewers, including service tiering and packaging, pay-per-view and near videoon-demand, electronic program guides and preview channels, home shopping, interactive ordering and advertising. Thaicom has delivered Digital DTH using the Ku-band frequency since 1993 and was the world's first full scale user to adopt the MPEG-2/DVB standard in 1995.

3. Channel Distribution Service Thaicom provides a wide range of teleport and satellite transponder services to Thai and international television stations and broadcasters that require a means to distribute their live or recorded programming to cable operators or to signal repeaters located throughout the coverage areas of Thaicom satellites. Thaicom global beam allows the customers to re-broadcast their television programs up to 120 countries in four continents, Asia, Europe, Australia and Africa.


4. Global Television Service Thaicom combines its channel distribution service with other satellite operators for satellite capacity and turnaround services for DTH re-broadcasting with a range of services to direct to homes operators in North America, Europe and Australia to a variety of domestic and international television broadcasters. Using Thaicom Global Beam, a single uplink of a satellite television channel or radio stations can potentially reach hundreds of countries in the four continents. The Global Digital TV Service includes digital compression service, uplink service, and transponder leasing service. Broadcasters can promote their ethnic television channels and business, educational and religious television to viewers. This service has proven popular for ethnic language programming that enables ethnic groups on one side of the world to broadcast programs to their ethnic cousins on the other side of the world. While this vast footprint covers everything between Western Europe and Japan, for areas outside of this footprint, Thaicom can arrange for satellite capacity and turnaround arrangements using several satellites to achieve truly global viewing.


5. High Definition Television (HDTV) Service In coping with the new trend of broadcasting industry, Thaicom offers High Definition Television (HDTV) transmission services (a digital broadcasting) using the THAICOM 5 platform. HDTV provides much clearer pictures and higher solution than traditional format such as NTSC, SECAM, and PAL. Currently, HDTV is a fastgrowing broadcasting technology and is widely successful in Europe and America. It has also begun to be more popular in Asia. The Company plans to offer the HDTV transmission service for Indochina and Thailand. Ways to make Profit Transponder Leasing and Related Business Conventional Thaicom business has grown steadily. In 2008, the company accomplished to add new customers, which mainly are international and domestic TV broadcasters. As at the end of 2008, there are 264 TV channels broadcast via the Thaicom satellites, an increase from 243 channels in 2007. The three new IPSTAR gateways in Korea, Malaysia and the Philippines have been deployed and operated in 2008. To date thirteen gateways in ten countries are in operation. In 2008, the new retail broadband package has been launched through


IPSTAR’s partners in New Zealand and the Philippines in order to increase consumer uptake. Eight IPSTAR service prociders in Australia have been granted the Australian Broadband Guarantee Program (“ABG”) from the Australian government. ABG is a form of a Universal Service Obligation subsidy program granting subsidies to qualified service providers to provide broadband services to areas in Australia that are unable to access metro-comparable broadband services, which mainly consists of rural households nationwide. With this subsidy grant, the number of IPSTAR endusers thus far has increased aggressively. In December 2008, the Company has signed a Contract with Vietnam Telecom International (“VTI”), a subsidiary company of Vietnam Posts and Telecommunications (“VNPT”), for IPSTAR capacity. Telephone Business Camshin has changed its name from “Cambodia Shinawatra Company Limited” to “Mfone Company Limited” (“Mfone”) since January 12, 2009. LTC announced the official launch of the first 3G Mobile System on October 17, 2008. During the first phase, LTC will provide 3G mobile service covering Vientiane and will expand its 3G service to provincial areas in 2009. Currently, LTC provides EDGE and GPRS services nationwide. A steady growth of mobile phone users in both Cambodia and Lao PDR made telephone operators recognize an increase in telephone subscribers, especially mobile prepaid subscribers. As of the end of 2008, LTC and Mfone’s total subscribers were 964,518 and 921,205, increased by 22.7% and 93.8% from 786,075 and 475,435 at the end of 2007. Due to the sale of 49% shares in Shenington Investments Pte Ltd. (“Shenington”) to Asia Mobile Holdings Pte Ltd. (“AMH”) in 2007, Shenington has recognized revenue and expense in the decreasing proportions from 100% to 51% from Mfone, and from 49% to 24.99% from LTC since July 26, 2007. Consequently, revenue from the telephone network business in 2008 decreased by 12.9% as compared to 2007.


Internet and Media Business In 2008, DTV Service Co., Ltd. (“DTV”), the Company’s subsidiary, had a continued growth of DTV sales volume. The total number of DTV satellite television dish sets provided thus far by DTV as of the end of 2008 was 346,612. CSL’s reported revenue from internet services rose by 5.8% from 2007 due to an increase in revenue from leased lines services as it has put more effort on expanding customer base in business or corporate segments which have lots of potential to grow in the industry.

Telephone Services The Company’s revenue from the telephone service business in 2008 was Baht 1,927 million, a decrease of Baht 285 million, or 12.9% compared to Baht 2,212 million in 2007. Following the sale of 49% shares in Shenington to AMH since July 25, 2007, the Company recognized a revenue reduction from LTC and Mfone for only five months in 2007, whereas a full-year revenue reduction was recognized in 2008. However, the growth of telephone subscribers in both Cambodia and Lao PDR, especially a significant growth rate of prepaid mobile phone subscribers leading to an increase in LTC and Mfone’s revenues. As at the end of 2008, LTC and Mfone had 964,518 and 921,205 subscribers, increase of 22.7% and 93.8% from 786,075 and 475,435 subscribers at the end of 2007 respectively. The new 330 telephone base stations were installed in 2008 to enlarge Mfone services to cover tourism spots and all major transportation routes in Cambodia, leading to a sharp growth in customer base in 2008. Internet and Media Services Revenue from the Internet access and media business in 2008 was Baht 503 million, an increase of Baht 260 million or 107.0% from Baht 243 million in 2007, mainly due to an increase in revenue from DTV sales including Cambodia and Lao PDR sales first incurred in Q1/2008. As at the end of 2008, accumulated DTV sales volume was 346,612 sets, up 245,445 sets from the end of 2007.


Future Business Potential In the future, the Company may have to do related transactions through both customary and non-customary business transactions under reasonable prices and conditions that yield maximum benefit to the company. Further, the Company will fully abide by the laws on securities and stock exchange, as well as rules, notifications, orders or regulations of the Stock Exchange of Thailand (SET) including regulations and practices relevant to disclosure of related transactions, acquisition or disposal of major assets of listed companies and subsidiaries. The related transactions will be disclosed in the notes to the financial statements audited by the auditor. Expansion During the year 2008, IPSTAR has successfully launched services in all countries, except that of India, Indonesia, Japan, and Taiwan with a total of 18 IPSTAR gateways covered by the IPSTAR satellites footprint, Thaicom plans to complete the service launch of the four remaining countries by 2009, this will complete the 14 countries designed coverage of the IPSTAR Satellite cross the AsiaPacific Region. For the year 2009, Thaicom has several key strategic directions in place in promoting the commercialization and development of IPSTAR services within the region. As one of the strategies for 2009, the “Telco Strategy” will be implemented in various countries through the engagement with Telecom operators, specifically proposing backhaul solution for mobile, telephony and ADSL network solutions targeted at the demographics in the rural area which do not have existing telecommunication infrastructure. An example of targeted countries for this strategy for the year 2009 are the China and India market, where by the Thaicom’s partners are large telecommunication operators, the targeted strategy will be the exploration in providing services to aid in the expansion of the operators 2nd Generation (2G) and 3rd Generation (3G) networks for rural area coverage. As part of the “Universal Service Obligation Strategy” (USO), Thaicom plans to engage directly with key government ministries in order to target USO funded


initiatives for both broadband and rural telephony. The aim is to primarily target countries with USO funds available, these includes countries such as Australia, New Zealand, China, India, Indonesia, Malaysia, Vietnam, Thailand and Japan. Moreover, Thaicom will focus on the six IPSTAR product applications applicable in the IPSTAR market. Through the “Retail Strategy” Thaicom plans to establish local retail markets through partnerships with local Service Providers, with IPSTAR applications aimed at consumers/SMEs, emphasizing on the use of IPSTAR as DSL Backhaul for telecom operators. The “Rural Telephony” strategy will be aimed at providing basic fixed line infrastructure to remote villages and households. The USO strategy will be targeting USO funded initiatives for rural telecommunication development projects, aimed at providing broadband and rural telephony services for rural areas. Under the Government & Enterprise strategy, solution providers or system integrators who are specialized in Government & Enterprise Networks with applications which demand for high bandwidth consumption such as in Virtual Private Network applications. Through the Mobile Backhaul strategy, the aim is to engage incumbent mobile operators to deploy IPSTAR Mobile Backhaul Solutions, focusing on partners whom are expecting to expand their rural network coverage, and partnering with key mobile network vendors such as Huawei and ZTE in order to accomplish type approval of IPSTAR system with key mobile systems such as 3G-UMTS and CDMA-EVDO for further future potential. Finally, as part for DVB services specifically for Satellite News Gathering (SNG), targeting both local and regional broadcasters. Financial Performance At the end of 2008, the Company reported total assets of Baht 28,421 million, a decrease of Baht 1,680 million or 5.6% from Baht 30,101 million at the end of 2007. This was mainly due to the depreciation and amortization of PP&E under concession agreements, lower cash and cash equivalents resulting from the payment of income tax payable from the sale of 49% shares in Shenington to AMH and from loan repayments for Thaicom 4 (IPSTAR) and Thaicom 5 projects and loan repayments made by DTV and Mfone, offset by an increase in PP&E.


THCOM’s asset components

Liquidity At the end of 2008, the Company had a current ratio of 0.86 times, down from 0.93 at the end of 2007. Investment Investment in CSL was presented as an “investment in an associate” item. At the end of 2008 the Company’s investment in an associate was Baht 381 million, a decrease of Baht 295 million or 43.6% from Baht 676 million at the end of 2007, reflecting a proportionate recognition of CSL’s net profit for 2008 amounted to Baht 67 million, offset by a dividend paid of Baht 175 million and capital deduction of Baht 188 million. Cash Flow The Company’s cash inflows from operating activities for 2008 were Baht 1,757 million. Net cash outflows from investing activities were Baht 1,841 million, mainly due to a payment of income tax payable of Baht 1,290 million from the sale of 49% shares in Shenington to AMH, and payments for satellite equipment and the expansion of telephone network. The Company had net cash outflows from financing activities of Baht 1,165 million mainly due to total long-term loan repayments of Baht 1,431 million including loan repayments for the Thaicom 4 and Thaicom 5 projects and the expansion of telephone network in Cambodia, and a loan repayment made by DTV. The Company had ending cash of Baht 1,173 million on December 31, 2008.


As of December 31st , 2008, Thaicom Plc. Had total revenues from sales and services of Baht 7.01 billion, an increase of 9.0% from 2007. Overall operating results improved over those of 2007; and the Company reported a decrease of Baht 1.2 billion in net loss comparing with that of last year. The consolidated financial statements reported cash flows from operating activities of Baht 1.757 billion. In 2008, both Lao Telecommunications and CS Loxinfo Plc. paid a dividend to their shareholders. In 2008, Thaicom has still not been able to pay the dividend to the shareholders. This resulted from the fact that the company need to keep its cash flow for operating cost as well as to repay debts. Moreover, in the time of economic crisis, we should be very careful in managing our cash flow. Risk Factors 1. Technology and Operating Risks • • • • • In-Orbit Failure Technological Changes Service Lives of Satellites Reservation of Satellite Orbit and Frequency Coordination Operating Risk


2. Business Risk • • • • • • Changes in laws, rules, regulations and Government policy Legal and Regulations Risks in countries where Thaicom Operates Potential Loss of Major Customers The Increasing Demand of Satellite Service slower than forecasted Competition from Other Satellite Operators, Terrestrial Network Operators, and Internet Service Operators Risk Resulting from Allegations of Breach of the Terms of the Satellite Agreement for the operation of domestic communication satellite • Risk from the ambiguities from the interpretation of the laws relating to compliance with the Agreement for the operation of domestic communication satellite : The issue of Back-up Satellite • • Risk from the change of the Company’s status to be an alien under the Foreign Business Act Risk on litigation to which the Company is not a party but may result in a revocation of Agreement for the operation of domestic communication satellite • • • • • • • • Risk on the Company’s ability to acquire sufficient transponder capacity for continued service Risk from the possibility of retroactive income tax from Thaicom 3’s insurance proceeds Risk from depending on sole vender

3. Financial Risks Risk from Currency Exchange Rate Fluctuations Risk from the effects of the global economic recession towards liquidity in local capital market Risk from delay collection Risk from Interest Rate Fluctuations Risk from failure by the Company to successfully comply with the covenants required in the Loan Agreements


4. Management Risk • • Loss of Specialized Experts in Management Risk related to the use of information technology

Expected Dividend Statistics as of 29/12/2006 P/E P/BV Book Value per share(Baht) Dvd. Yield(%) Last Price(Baht) Market Cap. N.A. 0.58 11.73 N.A. 6.80 7,419.27 28/12/2007 2.79 0.66 15.41 N.A. 10.20 11,140.63 30/12/2008 N.A. 0.19 15.17 N.A. 2.90 3,178.22 10/04/2009 N.A. 0.22 14.65 N.A. 3.18 3,485.08

Conclusion Due to the iPSTAR contract with THCOM’s India client will be signed by mid-2009 and bigger orders will be placed for user terminals in 2H09. Therefore, the firm’s performance is expected to turn positive in 2H09. In addition, revenue from conventional satellites (Thaicom 1,2 and 5) continue to grow, raising EBIDA by 7% to 2.3bn. Gross profit of the conventional satellite business rose 20% from the previous year from a decline in insurance fees and 4% sales growth as figure 2.2.1.


Figure 2.2.1

Figure 2.2.2

From figure 2.2.2 showed that we should invest in THCOM due to currently the share price is extremely lower than book value at 14.76 Baht. The present price is approximately 2.9 Baht/share. So, it will be better to buy for speculation. Even financial status in 2009 is expected to have not large profit but the tendency of the business continue to grow gradually form iPSTAR which will nearly to serve to cover all 14 countries. It has the positive effect toward iPSTAR to reach breakeven in 2009 and also generate the sustainable profit for THCOM.


3. Banking In the slowdown period, financial institutions especially commercial banks may be affected from increasing non-performing loan (NPL). But banking sector in Thailand is perceived to have very strong fundamentals and good management systems when comparing to others abroad. This is the reason why the price of major stocks in Thai banking sector is positively increasing. Moreover, from the analysts’ survey in 2008, banking sector is the only one sector that has positive DPS at 3.3% meaning that the cash flow which will be distributed to shareholders is not affected by economic conditions. According to the mentioned reasons, we suggest “BUYING ON WEAKNESS” for long-term investment of the following stocks.
3.1Kasikorn Bank Public Company Limited (KBANK)

Company Profile KASIKORNBANK Public Company Limited was established on June 8, 1945, with registered capital of Baht 5 Million and only 21 employees. Its first office is now the Thanon Sua Pa Main Branch. The Bank showed healthy performance after only six months in operation. As of December 31, 1945, or at the end of its first accounting period, the Bank recorded total deposits of Baht 12 Million, assets of Baht 15 Million and profits totaling Baht 0.18 Million. Since its inception, the Bank has grown healthily. As of December 31, 2008, the Bank, with registered capital of Baht 30,486 Million, had total assets of Baht 1,303,552 Million, total deposits of Baht 968,788 Million and total loans of Baht 900,587 Million. The Bank operates 662 branches across the country, comprising 224 Bangkok Metropolitan branches and 438 upcountry branches. The Bank has seven overseas offices, including the Los Angeles International Branch, Hong Kong Branch, Cayman Islands Branch, Shenzhen Branch and the Representative Offices in Beijing, Shanghai and Kunming, which greatly facilitate international trade and financial service transactions between Thailand and trade partners worldwide.


Nature of Business K-BANK provides various Product Groups, and Sales and Service Channels in 2008 to customers as follows: • Product Groups Types of Products Domestic Credit Products and Letters of Indemnity-Borrowing Details Domestic credit products are divided into two categories: 1) working capital finance, such as overdrafts and promissory notes. 2) long-term credit products or investment capital finance of various types. For SME customers, the bank’s focus is on loan products consistent with the nature of their businesses. The Bank also offers several contingent bank guarantee products, such as letters of indemnity-borrowing, avals, letters of guarantee on loans and financial statements.

Trade Finance

Offering export services, such as letters of credit (L/C), bills for collection, trust receipts, international fund remittances, and foreign exchange, etc. Providing efficient, effective, end-to-end working capital solution covering

Cash Management

collections, payments and liquidity management services, as well as other services


Securities Services

Securities services consist of mutual fund supervisory services, custodial services for provident and private funds for domestic and foreign individuals or companies, plus registrar services on unit trusts, government bonds and debentures.

Bancassurance Services

Bancassurance services provide credit insurance products - bundled with conventional banking products both life and non-life insurance products.

The two major categories of services provided: Corporate Finance 1) financial advisory services 2) corporate finance services, covering a full range of financial products and financial advisory services.

Currency and Interest Rate Risk Management Products K SME Care Consumer Loans

Offering comprehensive hedging solutions for management of foreign exchange and interest rate risks, as well as volatility in commodity prices. K SME Care is aimed at enhancing the business potential and sustainable growth for our SME customers. Such as “K-Home Loan plus Feng Shui”, “K-Home Loan


for Multi Purpose” Credit Cards Deposits and Fee-based Income such as the KBank-VISA Card and KBank-MasterCard It includes special fixed-term deposit accounts, Ready-to-Use Time Deposits bundled with personal accident coverage, and also bills of exchange with step-up interest rates. Mutual Fund Business Bancassurance • Sales and Service Channels - Branch Network - Foreign Exchange Booths - International Trade Service Offices - SME Business Centers - K-Contact Center - Cheque Direct Service Corners - Corporate Business Centers - Electronic Banking Service Special flexible funds, property funds, provident funds, Long Term Equity Funds (LTFs), as well as funds investing in alternative energy shares, and gold investment units. Providing a wide range of insurance products that are easy to understand with a variety of insurance premium plans to suit customers’ payment preferences.


The Structure of K-BANK’s Products and Services

Ways to Make Profit Interest and Dividend Revenues 1. Loans Personal and Mortgage Loans Overdraft ( OD ) Bill of Exchange

2. Interbank Transaction and Money Market Deposit Loans Secured Loans


3. Leasing and Credit 4. Stock Market The above information is the 4 categories of revenues that the Bank gains in term of interest on loans and dividend on stock in the market. However, interest and dividend revenues are 55,516 Million Baht, year 2007, that generated higher than 2006 with change of 3,706 Million Baht or 7.15%. The big gain was from interest on loans with change of 8.09% According to year 2007, income from interest and dividend were increased greater than interest the Bank paid as a result the net interest margin generated 4.13% in 2007 with the change of 0.03% from 2006. Other Revenues beyond Interest 1. Fees and Service Charges Avals and Certification Others

2. Profit from Money Exchange 3. Others Revenues In year 2007, the Bank, subsidiaries and associated company gained the noninterest income of 18,897 Million Baht with the change of 4,742 Million Baht or 33.50% as a result of fees and services adjusted on loans, credit card, and credit services. Besides the Bank also got the revenue from the money exchange services and stock market increased a lot. Future Business Potential and Expansion In 2008, KASIKORNBANK or KBank emphasized on satisfying the needs of customers by offering complete financial services with uncommon quality under a customer-centric approach. The Bank surveyed the customer needs and provides expertise covering seven customer segments, including Multi-Corporate Business, Large Corporate Business, Medium Business, Small and Micro Business, Middle Income, as well as Mass customers. The survey focused primarily on the customers’ satisfaction in financial services including other services which have been developed as the “K Now” project featuring knowledge in financial service deliveries that reflect

the Bank’s philosophy - “KASIKORNBANKGROUP: A People to Simplify your Life” that is the philosophy for uncommon quality. This covers a wide range of knowledge and information as well as advising services for every lifestyle and business type. Besides, the Bank also supports the development of community networks. KASIKORNBANKGROUP (KGroup) will serve as a firm foundation for coordinating and gathering entrepreneurs in the same or related business lines to strengthen sustainable business communities. This is achieved through efforts of KGroup staff, in addition to strong IT capabilities with an aim of providing excellent service deliveries for both individual and business customers. As corporate customer services, in 2008, the Bank aims at providing financial services following “Boundless Business” concept. SME business customers remained a primary focus for KGroup through the offering of completed service deliveries under the K SME Care project which covers capital supports, advisory services, and necessary information and knowledge for decision making in businesses. For individual customers, the Bank provided the integrated financial services to simplify financial needs for individual customers under the “ Leisurely Life” concept. This was achieved by launching the information-oriented and IT-based services which assist financial planning for customers in every stage of lives. By early 2008, KASIKORNBANK in cooperation with our business partner, Total Access Communication PCL. (DTAC), launched the new ATM SIM service. In addition, the Bank also extended the service hours for branches (KBank Extra Hour), from 8.3015.30 Hrs. during Monday - Friday, to 8.30-16.30 Hrs. Monday-Thursday, and 8.3018.00 Hrs. on Friday. According to an aim of providing comprehensive financial services; KASIKORNBANKGROUP - comprising KASIKORNBANK, KASIKORN FACTORING CO., LTD. (KFactoring), KASIKORN ASSET MANAGEMENT CO., LTD. (KAsset), KASIKORN RESEARCH CENTER CO., LTD. (KResearch), KASIKORN SECURITIES PCL. (KSecurities) and


KASIKORN LEASING CO., LTD. (KLeasing) Outlook for 2009 In 2009, the Bank will aim at fulfilling the customers’ financial needs under the “One-Brand-Six-Company” concept of KASIKORNBANKGROUP. The ‘Best’ service deliveries will be assured within all of our six related financial services businesses, with convenient and comprehensive services in four domains, including Operation & Transaction, Saving & Investment, Funding & Borrowing and Protection & Information. KGroup will look forward to becoming a “Solution Bank”, with knowledge and capability to identify and offer the best possible solutions and comprehensive financial products for customers. All of these efforts are based on the right understanding of customers’ needs via analyses and planning with the aim to meet financial requirements of customers in all seven segments. In addition, the Bank has continued to develop all necessary support functions, particularly human resources and IT facilities. We have also prepared for changes in the economic surroundings, by realigning the annual loan growth target in line with the country’s economic growth projection. Satisfactory expansion in fee-based income will also be given higher priority. Risk management guidelines have been adjusted in accordance with changes in the business environment. Of note is a prudent improvement in our credit policy in line with the current economic situation, particularly by setting target industries for credit extension and tightening credit underwriting criteria. The Bank will continue developing a stress-test process and define early-warning indicators in order to ensure timely review of credit quality. A special team will be set up to oversee customers likely to encounter liquidity risk, while we also aim to improve our debt collection efficiency. Regarding transactions with foreign counterparties, the Bank has developed a counterparty risk rating system, which helps control financial transactions with our counterparties in accordance with their ratings. It should be noted that the Bank did not have any investments in Collateralized Debt Obligations (CDOs) and other instruments related to sub-prime loans.


Financial Performance As seen below, the profit and loss table showed the net profit would increase every year from 15,005Baht(2007) to 20,607Baht(2011F).

Risk Factors Credit risk This refers to the risk that a counterparty or borrower may default on contractual obligations or agreements. Such a default may be caused by the counterparty’s inability to pay because of financial encumbrances, or their intention not to abide by the agreements, resulting in a loss to the Bank. The Bank has adopted a risk management procedure at international standards, based on sound balance between the business and credit underwriting functions to promote transparency, as well as checks-and-balances in credit processes. Creditrelated staff all share the goals of promoting and attaining good credit quality. Market risk It arises from changes in interest rates and exchange rates, as well as in securities and commodity prices, which can cause volatility in the Bank’s income or the economic value of assets and liabilities of the Bank and K Companies, either at

present or in the future. the Bank’s market risk management is set to comply with the assets into cash, or to obtain sufficient funds to meet cash needed with appropriate costs within a limited time period, which may then result in a loss to the Bank. The Bank has adopted the uniform liquidity risk monitoring procedures for K Companies for the more effective liquidity management of the whole KGroup. The Asset and Liability Management Sub-Committee (ALCO) is responsible for setting up policies and guidelines for managing liquidity, which must be complied with liquidity risk standards approved by the Risk Management Committee and the Board of Directors. Operational risk It refers to the risk of direct or indirect losses, resulting from inadequate or failed internal processes, personnel, operating and IT systems, or external events. It exists in all banking products, procedures, business units and IT systems, which can incur losses to the Bank, as well as to our customers and shareholders. Thus, the Bank developed the framework to implement effective operational risk management practices with a single standard that is systematically implemented across the entire KASIKORNBANK FINANCIAL CONGLOMERATE. Other Risk • Risks associated with Guarantees and Avals • Risks Incurred from Contractual Obligations on Derivative Instruments • Risks Related to Capital Adequacy

Expected Dividend and Capital Structure Dividend Payments On 28 August 2008, the Board of Directors Meeting of the Bank approved to pay dividends from the six-month operating results of 2008 at the rate of Baht 0.50 per share, totaling Baht 1,197 million, which was paid on 25 September 2008.


On 3 April 2008, the General Meeting of Shareholders of the Bank approved to pay dividends from the operating results of 2007 at the rate of Baht 2.00 per share, totaling Baht 4,784 million, in which Baht 1,194 million was paid on 27 September2007 and the remaining balance of Baht 3,590 million was paid on 28 April 2008. On 30 August 2007, the Board of Directors Meeting of the Bank approved to pay dividends from the six-month operating results of 2007 at the rate of Baht 0.50 per share, totaling Baht 1,194 million, which was paid on 27 September 2007. On 5 April 2007, the General Meeting of Shareholders of the Bank approved to pay dividends from the operating results of 2006 at the rate of Baht 1.75 per share, totaling Baht 4,175 million, in which Baht 1,191 million was paid on 27 September2006 and the remaining balance of Baht 2,984 million was paid on 30 April 2007. Summary of Yearly Earning ( 2006-2008 and 2009F-210F)

The Bank’s 2008 consolidated net interest and dividend income was Baht 42,436 million, increasing by Baht 5,005million, or 13.37 percent, over 2007. Conclusion Recently, KBANK taking a majority stake in Muang Thai Fortis will further strengthen its insurance banking synergy and support fee income growth. This acquisition is positive for the bank in term of revenue diversification and additional


fee income. KBANK has very strong fundamentals with a high NIM, good asset quality, and the lowest NPL ratio in the sector. It has NPL only 3% and coverage ratio is very high at 88%, while NPL and coverage ratio of the average of the sector is 6% and 71%, respectively. KBANK also announced a 2 Baht/dividend for 2008. Moreover, its ROE is very high at 15-16%. And its international investment is only 4% of total assets implying that KBANK is slightly affected from the slowdown of international economy, which cannot cause any damage to its overall business. Figure 3.1.1

From figure 3.1.1 showed that the price at the support line is approximately at 45 Baht/share. According to the forecast from the graph, it shouldn’t lower than this line. Thus, it is a good chance to invest for the speculation in this period.


3.2 Siam Commercial Bank Public Company Limited (SCB)

Company Profile The Siam Commercial Bank PCL was Thailand's first indigenous bank, established in 1906 under Royal Charter. According to unconsolidated financial information filed with the Bank of Thailand, the Bank was Thailand's third largest commercial bank in terms of total assets, deposits and loans as at September 30, 2008.

As of September 30, 2008, the Bank had, on a consolidated basis, Baht 1,196.7 billion in total assets, Baht 895.7 billion in deposits and Baht 889.3 billion in loans. The Bank has been listed on the SET since 1976.

The Bank provides a full range of financial services, including corporate and personal lending, retail and wholesale banking, foreign currency operations, international trade financing, cash management, custodial services, credit and charge card services and investment banking services, through its head office and its extensive branch network. Nature of Business Products and Services Features Siam Commercial Bank PCL conducts business in accordance with the Commercial Banking Act, the Securities Act, and other related announcements. In providing services to customers, the Bank and its subsidiaries closely cooperate to offer products and services for all types of customers, including large corporations, SMEs, and retail and high net worth individuals.

Deposit and lending are two important products and services. The Bank has a variety of services to meet the requirements of customers in every business segment. Services for individual customers include home and personal loans, ATM service, debit and credit cards, foreign exchange, overseas fund transfer, investment, and banc assurance. Services for corporations include business cash management, treasury products, debt and capital market products, as well as other financial services provided

by the Bank’s subsidiaries to individuals and corporations, such as securities trading, asset management, financial advisory, investment banking, and auto hire purchase.

Ways to Make Profit In 2008 prove a challenging year for the world economy, and the financial services sector in particular, as fallout from the US sub-prime crisis reverberated globally. International financial institutions encouraged a meltdown of mortgagebacked securities and CDOs resulting in high-profit bankruptcies and government bailouts. Fortunately, most Thai banks had limited exposure to troubled international assets, and remain relatively immune to major write-offs. However, the Thai banking industry remains closely linked to the performance of Thailand’s overall economy and its major industries and the sector is likely to face significant difficulties in 2009 particularly from rising NPL levels. Although it appears that the Thai economy’s growth prospects were negatively impacted 2009 proved a relatively prosperous year for the Thai bank industry. Future Plan Plans for 2009 The Bank will adhere to achieving its vision of being the bank of choice for its customers, shareholders, employees, and community and emerge as the leading financial services group in the country. This will be facilitated through close cooperation between the many units of the Bank and its subsidiaries, termed by the Bank’s as the 'Power of One'. Nevertheless, the effects of the global financial crisis and negative domestic factors will impact its business in the year ahead and it has prepared and adjusted its business plans in order to mitigate the impact of these external factors but, at the same time, exploit the opportunities that are available in this uncertain economic climate. The Bank will further improve risk management, tighten loan underwriting, and closely monitor potential credit quality problems. The highlights of the 2009 plans are as follows: Aggressive pursuit of fee and lending opportunities in the blue chip corporate and major state enterprise segment, particularly as the Bank has


built up its capabilities in this area in 2008 in anticipation of potential market share gains. Focus on building on existing customer relationships and increasing the fee share for other corporate and SME customers. Increase the fee income contribution from fund and insurance products in the retail segment, and also the roll-out of new sales channels and modest expansion in consumer lending. Focus on increasing fee income contribution from Treasury services. Further improve asset quality by establishing early warning systems and at the same time improve the speed and efficiency of NPL disposals. Control costs and increase productivity. In 2009, the Bank has based its plans on achieving the following benchmarks: Return on equity (ROE) at 17%. Return on assets at 1.8% Net loan increase at 5-7%. Cost-to-income ratio at 49%. NPL ratio of around 5.1%.

Expansion Growth through Innovation by introducing advanced technology to serve its customers, Siam Commercial Bank opened a new chapter for Thai banking and for itself, ushering in the age of electronic banking for the convenience of its customers. It was in line with the Bank’s newborn slogan "A Firm Foundation with Heartfelt Service". In this period, the Bank was broadening the branch network by adding both domestic and international branches, also stepped forward to the advent of the technology era. In1983, Siam Commercial Bank opened a new dimension in Thailand’s electronic banking by becoming the first to introduce Automatic Teller Machine (ATMs); the Bank also offered the first telephone banking service. Taken as a whole, this service led to enormous changes in Thailand’s finance and banking industry.


Besides banking service, Siam Commercial Bank had a general responsibility to society by supporting education both direct scholarships grants and formation of the Thai Bank Museum include social and cultural activities. Financial Performance




PCL announced




(consolidated) for 2008 with a net profit of Baht 21,414 million; an increase of Baht 4,058 million (23.4% yoy) from Baht 17,356 million in 2007. This was mainly attributable to both the strong net interest and dividend income (up 13.2% yoy) arising from higher loan volume and the ability to better manage NIM. Non interest income continued to grow (up 12.4% yoy) from robust fee and service income growth and gain on exchange. At the same time, the growth of non-interest expenses was sharply contained at 5.3%.

Operating profit (excluding allowance for doubtful accounts, income tax, and minority interest in subsidiaries) for 2008 was Baht 35,133 million, an increase of Baht 6,183 million (21.4% yoy) from Baht 28,950 million in 2007.


Earnings per share (EPS) for 2008 rose from Baht 5.11 in 2007 to Baht 6.30. Also, the return on average equity (ROE) and the return on average assets (ROA) increased from 16.5% and 1.6% in 2007 to 18.0% and 1.8%, respectively. Unit: Million Baht (Consolidated) Net Interest and Dividend Income Non-Interest Income Non-Interest Expenses Operating Profit Allowance for Doubtful Accounts Income Tax Minority Interest in Subsidiaries Net Profit EPS (Baht) ROE ROA 2008 44,330 25,141 34,337 35,133 4,954 8,888 -123 21,414 6.30 18.0% 1.8% 2007 39,177 22,367 32,594 28,950 4,036 7,434 125 17,356 5.11 16.5% 1.6% % yoy 13.2% 12.4% 5.3% 21.4% 22.8% 19.6% NM 23.4% 23.4%

Risk Non Performing Loan (NPL) Risk (Bank basis) NPLs arise when a debtor fails to repay debts according to an agreed schedule. The Bank stands to lose not only interest income, but sometimes also the principal balance, whether wholly or in part, and thereby this risk affects the Bank's profitability and capital adequacy. At the end of 2008, Bank NPLs stood at Baht 44,596 million, representing 4.7% of total credit outstanding, down from Baht 47,460 million or 5.7% in 2007. These NPLs


can be classified into 4 categories: restructured debts (14.9%), debts pending completion of restructuring negotiations (36.6%), debts pending the outcome of legal proceedings (25.5%), and debts pending legal execution (23.1%). The Bank manages its NPL Risk by setting aside adequate loan loss provision for expected losses. At the end of 2008, the Bank had total loan loss provision of Baht 38,707 million, or 86.8% of NPLs.

Foreign Exchange Risk The fluctuation in exchange rates affects the value of the Bank’s foreign currency denominated assets and liabilities. The Bank’s transactions exposed to foreign exchange risk include proprietary trading transactions and customer transactions for money transfers and payments relating to international trade and foreign investment. These transactions may result in a change of the Bank’s foreign currency position to a net creditor or a net debtor at a particular point in time. If the Thai baht appreciates against other foreign currencies, when the Bank is a net creditor, the Bank will suffer foreign exchange loss, while the depreciation of the Thai baht will let the Bank reap the benefit of foreign exchange gains. On the other hand, if the Bank is in a net debtor position, the appreciation of the Thai baht means foreign exchange gain for the Bank; and vice versa, the depreciation of Thai baht means foreign exchange loss. It is the Bank’s practice to hedge against foreign exchange risk by setting risk limits on foreign exchange risk exposure. These limits are determined by the use of statistical methods such as VaR, as well as monetary limits such as intraday position, overnight position, and stop-loss levels, etc. As of December 31, 2008, the Bank’s foreign currency position was as a net debtor of 47.97 million USD (USD equivalent), and the VaR was Baht 14.22 million. Interest Rate Risk The fluctuation of interest rates negatively affects the Bank’s interest income and expenses. Interest rate risk can be classified into 4 categories: Repricing Risk is the risk that arises from timing differences or mismatches in maturity and interest rate changes of the Bank’s assets and liabilities, primarily caused by shifts in major interest rates. For example, if the Bank’s assets can be


repriced faster than liabilities (Positive Gap), interest margins increase when interest rates rise. On the other hand, if the Bank’s assets can be repriced slower than liabilities (Negative Gap), interest margins narrow when interest rates fall. Yield Curve Risk is the risk that changes in market interest rates may have different effects on yields or prices on similar instruments with different maturities. Basis Risk occurs when the Bank's assets and liabilities are based on different benchmark interest rates, e.g. fixed-deposit rates, interbank lending rates, THBFIX interest rates, etc. Therefore, any change in benchmark interest rates will affect interest rates tied with assets and liabilities differently. Options Risk arises from implicit and explicit options in a Bank’s assets and liabilities, and off-balance sheet items. The exercise of options may affect the Bank’s management of revenue and cost. For example, the option of 3-month or 6-month deposits that allow depositors to withdraw funds before the due date will, if exercised early, cause the Bank to bear sooner-than-expected costs. In dealing with interest rate risk, the Bank sets risk tolerance limits for both the Trading Book and Banking Book. For Trading Book transactions, there are limits on VaR, Stop-loss levels, and Basis Point Value. For Banking Book transactions, limits are determined based on percentage of income and capital. Dividend and Capital Structure Statistics as of 29/12/2006 P/E P/BV Book Value per share(Baht) Dvd. Yield(%) Last Price(Baht) Market Cap. 11.96 2.01 28.92 5.14 58.00 109,828.79 28/12/2007 20.23 2.74 31.51 2.31 86.50 164,331.40 30/12/2008 7.64 1.36 35.51 3.17 48.25 119,799.18 10/04/2009 8.97 1.51 37.42 3.54 56.50 140,498.20


Registered Capital, as at December 31, 2008, worth Baht 70,000 million, dividing to: 1,922,294,701 Common Shares Par Value 5,077,705,299 Preferred Shares Par Value 10 10 Baht Baht

Paid in Capital, as at December 31, 2008, worth Baht 33,992 million, dividing to: 2,482,884,606 Common Shares Par Value 916,307,592 Preferred Shares Par Value Conclusion SCB has strong fundamentals with the highest ROE and the highest market capital. The bank has high outstanding profit in 2008 at 21 billion baht, 22% increase from 2007. It has a sufficient coverage ratio of 83.3%, which is higher than the average of the sector. Moreover, the NPL level of SCB is low comparing to other stocks in the same sector. The bank manages NPL risk by focusing on extending credit to low impact sectors and strengthening underwriting standards, especially in sectors that are expected to be highly affected by the economic slowdown, such as real estate, some exporting industries, and business bearing high energy costs. Besides, the reduction of loan and deposit rates, including savings is very helpful in relieving effects on NIM decrease. Figure 3.2.1 10 10 Baht Baht


From figure 3.2.1 showed that during the mid of 2008, the price of SCB reach the highest point between 80-90 Baht/share and decrease gradually according to the poor economy until it reached the support line at approximately 50 Baht/share. When the economy turns good or the price rise, we can sell and get the margin.


Chapter 3
This chapter is the calculation of beta coefficient of the chosen stocks to see how risky each stock is. To estimate beta, we run a regression with returns on the stock plotted on the Y axis and returns on the market portfolio plotted on the X axis. We used 25 weeks of weekly returns in calculating beta. 1. PTT Exploration and Production Public Company Limited (PTTEP)

From the above regression table, we get the equation r pttep = 1.102r M + 0.001. The slope of the regression line defined as the stock’s beta coefficient is equal 1.102, which is more than 1 (b > 1.0) meaning that the PTTEP stock is riskier than average.


2. Banpu Public Company Limited (BANPU)

From the above regression table, we get the equation r banpu = 1.789r M + 0.002. The slope of the regression line defined as the stock’s beta coefficient is equal 1.789, which is more than 1 (b > 1.0) meaning that the BANPU stock is riskier than average.


3. Advanced Info Service Public Company Limited (ADVANC)

From the above regression table, we get the equation r advanc = 0.7384r M + 0.0003. The slope of the regression line defined as the stock’s beta coefficient is equal 0.7384, which is less than 1 (b < 1.0) meaning that the ADVANC stock is less risky than average.


4. Thaicom Public Company Limited (THCOM)

From the above regression table, we get the equation r thcom = 1.0387r M + 0.0004. The slope of the regression line defined as the stock’s beta coefficient is equal 1.0387, which is more than 1 (b > 1.0) meaning that the THCOM stock is riskier than average.


5. Kasikornbank Public Company Limited (KBANK)

From the above regression table, we get the equation r kbank = 1.2162r M 0.0004. The slope of the regression line defined as the stock’s beta coefficient is equal 1.2162, which is more than 1 (b > 1.0) meaning that the KBANK stock is riskier than average.


6. The Siam Commercial Bank Public Company Limited (SCB)

From the above regression table, we get the equation r scb = 1.3904r M - 0.0003. The slope of the regression line defined as the stock’s beta coefficient is equal 1.3904, which is more than 1 (b > 1.0) meaning that the SCB stock is riskier than average.


Chapter 4
We made an investment in Thai Equity market for the period of 1 month since 16 March -11 April 2009 with 100 million baht investment. We put the investment in 6 stocks which are PTTEP, BANPU, ADVANC, THCOM, KBANK and SCB. The investment was made unequally based on the dividend and capital gain. The stock that provide us the high capital gain we will put a lot of investment on it such as BANPU. After we invested in Thai Equity market, we have the cash on hand at the amount of 24,365,850 Baht and the total market value of the invested stocks is at the amount of 220,129,800 Baht. The capital right now turns to be 205,732,295 Baht. The unrealized profit/loss is at the amount of 14,397,505 Baht and the realized profit/loss is at the amount of 95,733,146 Baht. Therefore, the total unrealized and realized profit is 110,170,651 Baht as in figure 4.1. For the proportion of investment as figure 4.2, we put large amount of money in BANPU (75.3%) because it provided us the high capital gain. We buy at 206 Baht/share and sell when the price rose to 222 Baht/share. The profit of BANPU was 16 Baht/share. Then, we put the investment in PTTEP (11.24%), ADVANC (5.57%), KBANK (3.88%), THCOM and SCB (4.01%) respectively. In conclusion, we can generate the profit at 110,170,651 Baht from the initial capital at 100,000,000 Baht. Most of the profit comes from the investment in BANPU and PTTEP because of the high margin. There is no loss in the portfolio because the market prices are higher than the cost of stock.


Figure 4.1


Figure 4.2


Chapter 5
The Beta Coefficient describes an individual asset's risk as compared to the overall market. It measures how much the particular asset moves in relation to a broader index. OR Beta coefficient describes how the expected return of a stock or portfolio is correlated to the return of the financial market as a whole. Beta is calculated using regression analysis. The formula for calculating Beta Coefficient: β = Cov (ri , rm ) / Var (rm) The variance (Var) of the combined return rm of the whole capital asset market, The covariance (Cov) between: - ri is the individual asset return - rm is the general market return,

Beta helped in decision making : For a stock, the highest its beta coefficient is, The highest is its risk, as well as its return. The more its price will move when the general stock index move (normally in the same direction).



 Beta value = 1

Security's price will move with the market.

 Beta value > 1

Security's price will be more volatile than the market.


 Beta value < 1

Security's price will be less volatile than the market

Independent asset means an asset with a beta of 0 means that its price is not at all correlated with the market. A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market; like if the market goes up, the asset generally decreases in value and vice versa. Beta is also referred to as financial elasticity or correlated relative volatility, and can be referred to as a measure of the sensitivity of the asset's returns to market returns, its non-diversifiable risk, its systematic risk or market risk. Benefits: Beta can give clues to volatility and liquidity in the marketplace.

Beta is a combination of volatility and correlation. For example, if one stock has low volatility and high correlation, and the other stock has low correlation and high volatility, beta can decide which is more "risky".

It can also be used as an indicator for required returns on investment (ROI). If the market with a beta of 1 has an expected return increase of 8%, a stock with a beta of 1.5 should increase return by 12%.

The beta value is a useful tool to measure price relationships under various market conditions can also be calculated using an adjustable range of percentage returns over time. For example, in a recession, a stock with a beta of 1 is statistically more probable to decline in price than a stock with a beta of 2. This is because the stock with a beta of 2 does not necessarily follow market trends.


Limitations: There is no market index that would be a measurement of the combined price evolution of all classes of assets. Thus the usual - and quite imperfect - proxy is a large stock market index.

Also, the beta is usually calculated on the basis of the previous 12 month data, by using a linear regression. It is an historical statistical parameter. Therefore, it cannot fully be a predictor of future evolutions.


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