Closing Price: Bt39.00 Upside/downside: N.A. Growth and integration with HEMRAJ · 2015. 4. 29. · Figure 11: Consolidated gearing ratio Source: Company data Expect additional value

Company Update 29 April 2015

1 Please see disclaimer on last page

WHA Corporation PCL (WHA)

Integrated industrial & logistic developer

► Growth and integration with HEMRAJ.

► Solid balance sheet despite massive debt for acquisition.

► Expect additional value from power business.

Growth and integration with HEMRAJ

We had the privilege of meeting with WHA’s management to discuss the

company’s outlook and strategies going forward. The main focus was the

major share acquisition of HEMRAJ. Apart from being best-in-class in the

industrial estate business with the No. 1 market share, which will be a

good stepping stone for WHA to enter into the industrial estate business,

HEMRAJ’s factories and warehouses for rent along with utilities & power

plant units provide more sustainable revenue for WHA, aside from WHA’s

current fluctuating core revenue from asset sales to REIT. The synergy

between WHA and HEMRAJ would capture more diverse groups of

customers in various industries with a variety of ready-built factories and

warehouses that would create a strong foothold in the domestic market.

Meanwhile, having land banks located in strategic locations around the

country and the increase in negotiating power, which could reduce the

company’s cost of capital, would increase WHA’s readiness to tap new

opportunities in the upcoming AEC.

Solid balance sheet despite massive debt for acquisition

WHA raised capital and ran up massive debt to acquire HEMRAJ and

its D/E ratio is now a very high 2.82x. However, the company’s

strategy to successively sell assets, including HEMRAJ’s, to REITs

should normalize its balance sheet back to an ordinary level within

two years.

Expect additional value from power business

WHA has an interest in expanding its power business from the current

solar panels on its warehouse roofs and SPP power plants from

HEMRAJ. Management said WHA and HEMRAJ can use the 2mn

sqm on the roofs of their warehouses and factories to expand solar

PV rooftop capacity to 200 MW. WHA expects additional value from

gathering its various power business units into one entity to be a

flagship for the group in the power business. Afterwards, WHA

expects to spin off the entity to list in SET in order to raise capital for

expansion and investment in other power plant projects in the near

future.

Not rated

TP: N.A.

Closing Price: Bt39.00 Upside/downside: N.A.

Sector Property

Paid-up shares (shares mn) 1,314

Market capitalization (Bt mn) 51,262

Free float (%) 24.47

12-mth daily avg. turnover (Btmn) 195

12-mth trading range (Bt) 41.50/

31.75

Major shareholders (%)

WHA Holding

Mrs. Jareeporn Anantaprayoon

Mr. Somyot Anantaprayoon

25.01

12.91

12.10

Financial highlights

Source: SET, SETSMART

Thailand Research Department

Mr. Napat Siworapongpun

License, No. 49234

Tel: 02 680 5094

(Year to December) 2012 2013 2014

Revenue (Btmn) 2,213 7,169 5,058

Net profit (Btmn) 212 1,463 979

EPS (Bt) 0.53 1.59 1.02

EPS growth (%) N.A 200% -36%

PE (x) 64.2 129.4 22.4

PBV (x) N.A 8.8 8.5

Div. yield (%) N.A 0.2 2.3

ROE (%) 10.5 40.7 22.7



WHA: A developer of high quality built-to-suit warehouses

WHA was established in 2003 as a developer of built-to-suit warehouses, general

warehouses, distribution centers, office buildings and factories. Some of its warehouse

and rental business assets are rented to customers in various industries while others

are sold to WHAPF, WHA’s property fund unit, and WHART, WHA’s REIT. WHA holds

and manages its property fund and REIT units which brings the company stable

dividend income, as an owner, and management fees as a fund manager. Moreover,

WHA participated in a joint venture with Gunkul Engineering PCL (GUNKUL) for a 4.28

MW solar PV project on the roofs of WHA’s warehouses. Of that, 3.3 MW was sold

commercially in 2014.

Figure 1: WHA’s business

Source: Company data

Figure 2: WHA’s revenue structure over the last years.


Revenue structure (Btmn) 2012 2013 2014

Rental and service income 360 500 551

Income from sales of investment properties 1,809 6,585 4,337

Dividend income 32 57 98

Asset management income 6 10 15

REIT management income 33

Other income 6 17 23

Total 2,213 7,169 5,058



Outstanding with built-to-suit development

WHA focuses on creating additional value for tenants in terms of logistics cost

management by understanding the business specifications and requirements of the

customers. The company offers high quality built-to-suit warehouses, distribution

centers and factory buildings that are designed and developed to cater to the complex

requirements of its tenants in various industries (most of its clients are in consumption

and healthcare industries). The company also takes into consideration overall

utilization, for example, column positions, floor load capacity and clear height suitable

for the business, number and position of doors, loading and unloading area and flatness

and racks, floor level in comparison with truck height, infrastructure system, as well as

ventilation and temperature control systems. The ability to meet various purposes of

use helps WHA to frequently win bids, as evidenced by the continuous growth in its

leasable area despite the relative premium of its rental rate. Also, WHA has sold many

built-to-suit units to its REITs which earns the company a high dividend income.

Figure 3: WHA Group’s well-known tenants, as of 31 Dec 2014


Strategic locations

WHA’s main locations are in five zones: 1) Outer East Bangkok zone (Bangna-Trat road,

Chonburi and Lardkrabang), where most of WHA Group’s projects are located, with

convenient access to Suvarnabhumi Airport and Laem Chabang seaport for

transportation and distribution of goods. 2) Industrial estate zone, with tax privileges. 3)

Outer North Bangkok zone (Bang Pa-in, Wangnoi, Ayuthaya) which is a gateway to the

north of Thailand. 4) Rama 2 Road, Samutprakarn (cold warehouses are needed). 5)

Khonkaen, Surathani and Lumpoon in preparation to serve client’s business expansion

in urban areas.



Figure 4: Investment portfolio locations


A big deal with HEMRAJ

WHA recently acquire 92.88% paid-up shares of HEMRAJ whereby offering to purchase

HEMRAJ shares for a voluntary tender offer of Bt4.50 per share, with a total deal value

of Bt40.8bn. This required a massive amount of funding and caused WHA to run up

huge loans alongside some capital increase. However, various benefits from the

acquisition should be seen.

1) Acquired best-in-class industrial estate business: HEMRAJ’s strategy in industrial

estate business is to focus on high-end infrastructure intensive industrial customers

in various clusters, i.e. automotive, petrochemical, steel, power and electronics,

providing robust integrated services and suitable logistics locations. As a result, the

number of HEMRAJ customers has continuously increased since 2009 making it

the No. 1 in market share, with 975 contracts on 646 customers (as of Dec 2014).



Figure 5: Growing number of industrial customers and land sales


Figure 6: HEMRAJ is No. 1 in terms of land sales


2) Stable income for WHA: Apart from land sales, HEMRAJ is a leading industrial

estate developer who provides total solutions, including warehouse & ready-built

factory rentals, water supply and power supply to industrial customers. These

business lines contribute sustainable income to WHA, aside from WHA’s current

fluctuating core revenue from asset sales to REIT.

1621

144

930

1670

23172200

665

2008 2009 2010 2011 2012 2013 2014

Unit: Rai

+27 +13 +19 +49 +80 +60 +31IncreaseCustomers

1670

23172200

665

1565

2847

1009

383560

2763

333

n.a.0

500

1000

1500

2000

2500

3000

2011 2012 2013 2014

HEMRAJ AMATA ROJNA

Rai



Figure 7: Total solution in industrial estate business


Figure 8: Well-diversified source of HEMRAJ’s revenue.


3) Synergy: WHA and HEMRAJ would capture more diverse groups of customers in

various industries (e.g. automotive, consumer product, petroleum, and electronics)

with a variety of ready-built factories and warehouses that would create a strong

foothold and increase market share in the domestic market. Furthermore, having

land banks for development located in strategic locations in the country and the

increase in negotiating power, which could reduce the company’s cost of capital,

would increase WHA’s readiness to tap new opportunities with the coming of AEC.

Solid balance sheet despite massive debt for acquisition

In order to pursue the acquisition, WHA raised equity capital through Right Offering of

Bt8.9bn alongside a massive institutional loan of Bt31.9bn. Despite consolidating a

healthy financial position from HEMRAJ, the acquisition raised WHA’s D/E ratio to a very

high 2.82x. However, the strategy to successively sell assets, including HEMRAJ’s, to

REITs should normalize WHA’s balance sheet back to an ordinary level within 2 years.



Figure 9: Overall sources of funds based on 92.88% acquisition


Figure 10: Debt take-out plan


Figure 11: Consolidated gearing ratio


Expect additional value from power business

WHA has an interest in expanding its power business from the current solar panels on

its warehouse roofs and SPP power plants from HEMRAJ. Management said WHA and

HEMRAJ can use the 2mn sqm on the roofs of their warehouses and factories to expand

solar PV rooftop capacity to 200 MW. WHA expects additional value from gathering its

various power business units into one entity to be a flagship for the group in the power

business. Afterwards, WHA expects to spin off the entity to list in SET in order to raise

capital for expansion and investment in other power plant projects in the near future.

1) Net proceeds of HEMRAJ non-core asset 3,000 HEMRAJ Jul-15

2) Net proceeds of WHA office buildings 1,800 HEMRAJ Sep-15

3) Net proceeds of HEMRAJ’s RBF & RBW #1 6,500 HEMRAJ Nov-15

4) Net proceeds of HEMRAJ’s RBF & RBW #2 6,500 HEMRAJ Nov-16

5) Net proceeds of WHA’s WH #1 4,000 WHA Dec-15

6) Net proceeds of WHA’s WH #2 4,000 WHA Dec-16

7) Listing of H’s utilities & power or finding strategic partners 2,900-3,000 HEMRAJ 2016-17

Total 28,700-28,800

Due dateEntityAmount (Btmn)Source of repayment

2.823.13 2.92

2.11 2.09 2.07 2.061.51

0

0.5

1

1.5

2

2.5

3

3.5

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16

WHA office HemrajREIT

Hemraj REITTarget 2.5x

Total Consideration

THB 40,829 mm

Capital Increase

THB 8,938 mm

Bank Loan (WHA)

THB 31,891 mm

Bridging Loan (2 Years)

THB 25,854 mm

LT Loan (7 years)

THB 6,037 mm

CG Report

8

Please see disclaimer on last page

Corporate Governance Report disclaimer

The disclosure of the survey result of the Thai Institute of Directors

Association (“IOD”) regarding corporate governance is made pursuant

to the policy of the Office of the Securities and Exchange Commission.

The survey of the IOD is based on the information of a company listed

on the Stock Exchange of Thailand and the Market for Alternative

Investment disclosed to the public and able to be accessed by a

general public investor. The result, therefore, is from the perspective of

a third party. It is not an evaluation of operation and is not based on

inside information.

The survey result is as of the date appearing in the Corporate

Governance Report of Thai Listed Companies. As a result, the survey

result may be changed after that date, Asia wealth Securities Company

Limited does not conform nor certify the accuracy of such survey result.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2014.

Score Range Number of Logo Description

90 – 100

80 – 89

70 – 79

60 – 69

50 – 59

Below 50

No logo given

Excellent

Very Good

Good

Satisfactory

Pass

N/A

BAFS EGCO IRPC KTB PTTEP SAT SIM TOPBCP GRAMMY IVL MINT PTTGC SC SPALIBTS HANA KBANK PSL SAMART SCB TISCOCPN INTUCH KKP PTT SAMTEL SE-ED TMB

AAV BIGC DELTA HMPRO NBC PJW SAMCO SVI TOGACAP BKI DRT ICC NCH PM SCC TCAP TRCADVANC BLA DTAC KCE NINE PPS SINGER TF TRUEANAN BMCL DTC KSL NKI PR SIS THAI TSTEAOT BROOK EASTW LANNA NMG PRANDA SITHAI THANI TSTHASIMAR CENTEL EE LH NSI PS SNC THCOM TTAASK CFRESH ERW LHBANK OCC PT SNP TIP TTWASP CIMBT GBX LOXLEY OFM QH SPI TIPCO TVOBANPU CK GC LPN PAP RATCH SSF TK UACBAY CNT GFPT MACO PE ROBINS SSI TKT VGIBBL CPF GUNKUL MC PG RS SSSC TNITY VNTBECL CSL HEMRAJ MCOT PHOL S&J STA TNL WACOAL

2S BEAUTY CSS IHL MFEC PPM SKR TBSP TSC ZMICOAF BEC DCC INET MJD PPP SMG TEAM TSCAH BFIT DEMCO IRC MODERN PREB SMK TFD TTCLAHC BH DNA IRCP MONO PRG SMPC TFI TUFAIT BJC EA ITD MOONG PRIN SMT THANA TVDAJ BJCHI ESSO KBS MPG PTG SOLAR THIP TWFPAKP BOL FE KGI MTI QLT SPC THREL UMIAKR BTNC FORTH KKC NC QTC SPCG TIC UPAMANAH BWG FPI KTC NTV RCL SPPT TICON UPFAMARIN CCET GENCO L&E NUSA SABINA SST TIW UPOICAMATA CGD GL LRH NWR SALEE STANLY TKS UTAP CGS GLOBAL LST NYT SCBLIF STEC TLUXE UVAPCO CHOW GLOW MAJOR OGC SCCC STPI TMI UWCAPCS CI GOLD MAKRO OISHI SCG SUC TMT VIHAQUA CKP HOTPOT MATCH PACE SEAFCO SWC TNDT WAVEARIP CM HTC MBK PATO SEAOIL SYMC TPC WHAAS CMR HTECH MBKET PB SFP SYNEX TPCORP WINASIA CSC HYDRO MEGA PDI SIAM SYNTEC TRT WINNERAYUD CSP IFS MFC PICO SIRI TASCO TRU YUASA

Source: Thai Institute of Directors (IOD)

Contact

9

Please see disclaimer on last page

s

Branch Address Phone Fax

Head Office 540 Floor 7,14,17 , Mercury Tower, Ploenchit Road, Lumphini,

Pathumwan Bangkok 10330

02-680-5000 02-680-5111

Silom 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd., Silom,

Bangrak, Bangkok, 10500 Thailand

02-630-3500 02-630-3530-1

Asok 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21 Road,

Klong Toey Nua, Wattana, Bangkok 10110

02-261-1314-21 02-261-1328

Pinklao

7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr., Room

No.1605-1606 Baromrajachonnanee Road, Arunamarin, Bangkoknoi,

Bangkok 10700

02-884-7333 02-884-7357,

02-884-7367

Chaengwattana

99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr., Room

2204 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi 11120

02-119-2300 02-835-3014

Chaengwattana 2

9/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,

Room 2203 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi

11120

02-119-2388 02-119-2399

Mega Bangna 39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad Road,

Bangkaew Bangplee, Samutprakarn 10540

02-106-7345 02-105-2070

Rayong 356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang District, Rayong

Province 21000

038-808200 038-807200

Khonkaen 26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen

40000

043-334-700 043-334-799

Chonburi 55/22 Moo 1, Samed Sub District, Muang District, Chonburi 20000 038-053-858 038-784-090

Chaseongsao 233-233/2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub-District,

Meung District, Chachoengsao 24000

038-981-587 038-981-591

Closing Price: Bt39.00 Upside/downside: N.A. Growth and integration with HEMRAJ · 2015. 4. 29. · Figure 11: Consolidated gearing ratio Source: Company data Expect additional value

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