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Electronics

Confidence has returned

Electronics

SCBS held an "Electronics Day" seminar yesterday with managements from all

four companies on our Buy list: DELTA, HANA, KCE and SVI

All show confidence in 2014F, thanks to economic recovery in the US and China

and benefit from baht depreciation

Earnings upgrades coming up to incorporate these positives

Two criteria to select favorites: 1) benefit from the US recovery and 2) high

earnings growth in 2014F. HANA and SVI pass the test.

Keen interest in our "Electronics Day". We held "Electronics Day" yesterday and it was well

attended by ~40 local institutional investors who came to hear presentations made by

executives of DELTA, HANA, KCE and SVI. All have a very positive view towards 2014F,

underwritten by the improving global economic outlook and baht depreciation.

HANA, SVI best bets. HANA and SVI appear to be situated to benefit the most from the US

economic recovery. We are in the process of revising up forecasts for all electronics

companies under coverage to incorporate the weaker baht from the current 2014F

assumption of Bt31/US$ and the better outlook for HANA. With the highest forecast earnings

growths in 2014 and best benefits from the US recovery, SVI and HANA are our favorites.

Delta Electronics (Thailand) PLC (DELTA TB) - BUY

- Presented by Khun Kulwadee Kawayawong, head of investor relations.

- Management looks for 7-10percent sales growth (in US$ terms) in 2014F from 1) cloud

computing-related segment, 2) telecom power supplies, 3) industrial and medical

equipment and 4) automotive segment.

- New business: the charger for hybrid cars just took off, so it is too early to expect much

growth this year. However, the long term outlook is good for the hybrid and electronic

car segment, we believe.

- It successfully reduced SG&A/sales to ~15.5% in 2013F from 17.4% in 2012A; this is likely to

come down further in 2014F, generated by effective expense control.

- US$300mn+ cash on hand support planned acquisitions, budgeted at no more than

US$100mn each, to expand R&D and/or regional business.

- We rate it Buy with a Bt56 TP. Earnings revision from baht depreciation is in the process.

Hana Microelectronics PLC (HANA TB) - BUY

- Presented by Mr. Richard David Han, CEO.

- After three years of earnings pressure after the flood in late 2011 plus the PC weakness in

2013, outlook is much better for in 2014F, especially from the US economic recovery.

- Order flows in 1H14 look strong, although normally a low season, backed by industry

inventory restocking for the laptop segment, the US recovery and steady growth in the

automotive segment thanks to high demand for sensors for various purposes.

- Its touchpad for laptops, which suffered from the PC weakness last year, recovered

materially in early 2014F, thanks to industry inventory restocking.

- Timely new capacity consisting of a new plant in Lamphun, where completion is

scheduled for 2Q14, and in Koh Kong, Cambodia, where completion is scheduled for 4Q14,

supporting improving demand.

- Management looks for the double-digit sales growth in 2014F and a better profit margin

from economies of scale.

- Upgrades from improving outlook and baht weakness are in the works. Maintain Buy and

TP (before revision) of Bt24


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