SVI

SVI Plc

Key takeaway from analyst meeting: 2013F outlook remains good. The message
from SVI’s CEO confirms the positive outlook for 2013, with several new clients
(including one from Japan) already beginning with small volume in 3Q12 before
enlarging volume in 2013. These should more than offset the loss of one client after
the flooding. Full recovery of orders from the remaining clients is expected in 2013. We
expect SVI’s earnings to recover to a new record of Bt816mn core profit in 2013F.

But slow payment of insurance claims could delay DPS and investment.
Unfortunately the insurance company is processing claims so slowly that management
has extended the insurance timeline from 2012 to 2013 and is hoping for some help
from the government. SVI filed claims for Bt3.75bn compensation, consisting of
Bt1.45bn for raw materials, Bt1.55bn for facilities and equipment and Bt750mn for
business interruption. It received Bt220mn insurance compensation in 1H12A and
management expects to get Bt300-400mn more in this quarter, with the rest in 4Q12-
2013. As a result, we see a high chance that SVI will not pay a dividend in 2012.
Furthermore, the insurance delay could curtain SVI’s capacity expansion for future
growth and also delay planned acquisitions.

Recent price rise has narrowed upside, downgrade to Neutral. Although we still
like its 2013F outlook, the feeling in the market is negative right now because of the
slow progress in insurance compensation and the good chance there will be no
dividend this year. Furthermore, the 12% rise in share price over the past two months
has narrowed upside to our mid-2013 TP of Bt4.1 (based on 11x PE, which is the
industry ten-year average) has narrowed to 9%. This has led us to downgrade to
Neutral from Buy.