Taiwan Discovery Forum

Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: HSBC Securities (Taiwan) Corporation Limited View HSBC Global Research at: https://www.research.hsbc.com   HSBC is hosting its 6th Annual Taiwan Discovery Forum on 6 December in Hong Kong and 7 December in Singapore  A total of 18 companies are participating, represented by top management  This report includes profiles of the companies presenting Welcome to HSBC’s 6th Annual Taiwan Discovery Forum This forum is designed to connect Taiwan’s exciting up-and-coming corporates with our large network of institutional investor clients. Participating companies will come from a range of industries, from domestic consumer companies to China plays and pure exporters. Investors will have the opportunity to gain insight into how Taiwan’s growth players are dealing with global economic changes and capturing new business opportunities at home and abroad. 1 December 2016 John Chung* Head of Research, Taiwan HSBC Securities (Taiwan) Corporation Limited john.chung@hsbc.com.tw +8862 6631 2868 *Employed by a non-US affiliate of HSBC Securities (USA) Inc and not registered/ qualified pursuant to FINRA regulations Taiwan Discovery Forum EQUITIES TAIWAN 6-7 December 2016  EQUITIES ● TAIWAN 1 December 2016 2 Covered companies 3 Asia Cement (1102 TT) 4 Chroma ATE (2360 TT) 6 Compal (2324 TT) 8 E Ink Holdings (8069 TT) 10 GIS (6456 TT) 12 Ju Teng (3336 HK) 14 Sinbon Electronics (3023 TT) 16 Tripod Technology (3044 TT) 18 Non-covered companies 21 Alpha Networks (3380 TT) 22 BizLink (3665 TT) 23 China Life Taiwan (2823 TT) 24 Fulgent Sun (9802 TT) 25 Kingpak (6238 TT) 26 KMC (5306 TT) 27 Richwave (4968 TT) 28 Samebest (8489 TT) 29 Shin Zu Shing (3376 TT) 30 Wistron Neweb (6285 TT) 31 Disclosure appendix 32 Disclaimer 35 Contents 3 EQUITIES ● TAIWAN 1 December 2016 Covered companies  EQUITIES ● TAIWAN 1 December 2016 4 Asia Cement (1102 TT) Business description  Asia Cement Corporation (ACC) is engaged principally in the production of cement and clinker. Applications for its cement products include underground foundation engineering, large-scale concrete works, port engineering and chemical engineering. Key points  Improving operating profit margins for cement have been complemented by margin improvement in other sectors, leading to improving ROE trends for 2017, which we forecast to continue into 2018.  ACC’s latest results also showed q-o-q and y-o-y improvement in other businesses, including its IPPs, and in its investment sector.  Rising cement prices in Mainland China have been offset by rapidly rising coal costs which have capped margin expansion; coal makes up approximately a third of the cost of sales for cement. Valuation and risks  Valuation: Our target price for ACC is TWD31. We value Asia Cement’s shares at 0.77x 2017e PB, based on 2017e ROE of 5.3%. Our target price implies 14% upside, and we rate the stock Buy as we think that improving ROE trends will be maintained in 2017 and 2018 as a result of a stronger than previously forecast recovery in earnings.  Key downside risks: A slow pick-up in China cement demand and a lower-than-expected cement ASP; an operating margin weaker than forecast for non-cement business. BUY TARGET PRICE (TWD) 31.00 MARKET DATA SHARE PRICE (TWD) UPSIDE/DOWNSIDE Market cap (TWD) 91,316 Free float 61% 27.15 +14.2% Market cap (USDm) 2,865 BBG 1102 TT 3m ADTV (USDm) 3 RIC 1102.TW (at close of 28 November 2016) FINANCIALS AND RATIOS (TWD) 52-WEEK PRICE (TWD) Year to 12/2015a 12/2016e 12/2017e 12/2018e HSBC EPS 1.58 2.02 2.13 2.15 Consensus EPS 1.75 1.43 1.79 2.05 PE (x) 17.1 13.5 12.7 12.6 Dividend yield (%) 4.1 4.5 5.6 5.6 EV/EBITDA (x) 2.5 3.9 3.9 3.9 ROE (%) 4.1 5.5 5.5 5.5 Source: Company data, Bloomberg, Thomson Reuters Datastream, HSBC estimates Source: ThomsonReuters IBES, HSBC estimates Wei Sim* Analyst The Hongkong and Shanghai Banking Corporation Limited weisim@hsbc.com.hk +852 2996 6602 Tracy Li* Associate The Hongkong and Shanghai Banking Corporation Limited tracy.s.w.li@hsbc.com.hk +852 2996 6751 *Employed by a non-US affiliate of HSBC Securities (USA) Inc and not registered/ qualified pursuant to FINRA regulations 5 EQUITIES ● TAIWAN 1 December 2016 Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018e Profit & loss summary (TWDm) Revenue 66,287 63,901 64,579 64,783 EBITDA 9,780 13,153 12,245 12,415 Depreciation & amortisation -5,740 -5,578 -5,251 -5,382 Operating profit/EBIT 4,040 7,575 6,994 7,033 Net interest -1,648 -1,576 -1,498 -1,498 PBT 6,814 6,584 8,125 8,208 HSBC PBT 6,814 6,584 8,125 8,208 Taxation -1,880 -1,093 -1,108 -1,121 Net profit 4,860 5,029 6,561 6,630 HSBC net profit 5,465 6,331 6,690 6,759 Cash flow summary (TWDm) Cash flow from operations 13,665 8,017 10,598 10,789 Capex -3,45