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Market Talk
June 5, 2015
Investment Strategy
A rebound was found in some sectors of which the prices had fallen more deeply than our forecast down
revision, e.g. banking. However, fluctuation remains; SET Index may be moving under 1,500 pts. We still
recommend stocks benefiting from weak THB (TUF, VNG, HANA, and RCL). HANA(FV@B48) is still a top
pick.
YTD Change in Return by Sector
YTD return
Agri
Entertain
ICT
Property
Food
SET
Commerce
Auto
Transport
Insurance
Energy
Hotel
Health
Const Mat
Const Services
Finance
Petro
-13%
-20%
Bank
-15%
-5%
2%
-5%
-13%
-10%
-5%
-3%
-5%
-2%
-7%
2%
0%
-3%
0%
-2%
0%
2%
-4%
-2%
2%
2%
0%
1%
9%
5%
5%
4%
-4%
-5%
-1%
0%
1%
5%
Electron
-1,688.38
-307.72
1,413.33
582.77
0%
10%
-2%
13%
15%
12%
20%
17%
25%
20%
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
May return
30%
23%
1,490.90
8.83
36,487.33
22%
SET Index
Change
Market cap (Bm)
IMF sees U.S. policy rate hike in late 2015 or early 2016
US The U.S. leading economic figures, mainly the labor market, have still shown contrary signs, possibly hindering
economic recovery more than expected. Although latest initial jobless claims decreased by 6,000 unit (versus 7,000 increase
in the previous week), it has been swinging up and down unstably for many weeks. After 1Q15 GDP growth was reported at
2.7%yoy, the IMF lowered U.S. GDP growth forecast from 3.1% to 2.5% in 2015 and from 3.1% to 3% in 2016. The housing
market has recovered more sluggishly than expected and USD has strengthened and depressed international trade, thus
impeding U.S. economic growth. As a result of strong USD and low energy prices, the inflation rate is still far from Fed
target of 2%. The IMF sees that the policy rate should be raised in 1H16, in line with our projection that the hike takes place
in late 2015 or early 2016.
Eurozone The economic reform plan negotiation between Greece and the creditors has made no progress yet. Greece
requested the IMF a deadline extension for the debt repayment of EUR300m due this Friday and another three debt
repayment postponement, intending to bundle together EUR1.6bn total debt payments in late June (according to the IMF's
condition adopted in 1970, Eurozone countries can bundle together multiple debt repayment due in the same month); the
IMF's decision on Greece's request for postponement needs to be monitored closely (previously extending Zambia's
Porranee Thongyen, CISA deadline in 1980). Greece's bailouts from creditors will expire late this month, raising concern about Greece's default and
Grexit and thus having negative sentiment.
License No: 004146
[email protected]
Therdsak Thaveeteeratham
License No: 004132
[email protected]
Pobchai Phatrawit
License No: 052647
[email protected]
English research reports are a rough translation of our Thai-language
research products. It is produced primarily with time efficiency in mind, so
that English-reading clients can see what the main recommendations are
from our Thai-language research team. Given that this is a rough-and-ready
translation, Asia Plus Securities Company cannot be held responsible for
translation inaccuracies.
The Thai language research reports and information contained therein
are compiled from public data sources and our analysts' interviews
with executives of listed companies. They are presented for
informational purposes only and not to be deemed as solicitations to
buy or sell any securities. Best attempts have been made to verify
information from these vast sources, but we cannot guarantee their
accuracy, adequacy, completeness and timeliness. The analyses and
comments presented herein are opinions of our analysts and do not
necessarily reflect the views of Asia Plus Securities.
Thailand May consumer confidence index fell for the fifth consecutive month and made a 11-month low at 75.6 because
agricultural product prices have remained low and depressed farmers' (the majority of Thai citizens) income and purchasing
power; consumer product prices have remained higher than their income. The global economic recovery has not been stable
yet, possibly weakening export. 2Q15 household spending (40% of GDP) is projected to drop from 2.4%yoy in 1Q15 (weak
base in 1Q14). We estimate Thailand's FY2015 GDP to grow by 2.5%yoy, depending mainly on government investment and
tourism.
Banks rebounds as share prices drop more than earnings down revision
Under the new forecast, market earnings are projected at B888bn or EPS of 95.74 (24.79% EPS growth) in 2015 and
B1.02tr or EPS of B109.97 (14.86% EPS growth) in 2016. Earnings of the following sectors are projected to grow in 2015:
Transportation 159% growth projected: AAV (+689%), BA (+427%), and RCL (+38%)
Petrochemical 97% growth projected: IVL (+205%) and PTTGC (+98%)
Energy 95% growth projected: PCP (+517%), PTT (+69%), and PTTEP (+40%)
Insurance 45% growth projected: BLA (+60%) and BKI (+12%)
Tourism-hotel 35% growth projected: CENTEL (+52%)
Contractor 35% growth projected: NWR (+1,074%), UNIQ (+59%), CK (+59%), and ITD (+55%)
Media 27% growth projected: WORK (+1,900%) and RS (+66%)
Construction material 24% growth projected: TASCO (+146%), TPIPL (+45%), VNG (+42%), and SCC (+24%)
Commerce 23% growth projected: LOXLEY (+54%), CPALL (+32%), and BEAUTY (+26%)
Electronics 23% growth projected: DELTA (+21)
Auto 23% growth projected: AH (+31%) and SAT (+20%)
Healthcare 11% growth projected: BH (+30%) and CHG (+23%)
ICT 3% growth projected: TRUE (+341%) and JAS (+339%)
Banking 2% growth projected: TISCO (+12%), TCAP (+12%)
Food 1% growth projected: TUF (+17%), MINT (+25%)
On the other hand, the property sector's earnings are projected to stay flat, while earnings of the agribusiness and the
consumer's finance sectors are expected to slip by 1% and 3%, respectively.
Sectors indices tend to drop at a faster pace than the earnings. On the contrary, the banking sector's index has
contracted by 5% in May and 14%ytd, versus our 5.5% earnings forecast down revision. Since we conservatively expect the
policy rate to be reduced by 0.5% to 1%, the actual interest rate cut would not depress the sector's earnings below our
forecast unless the rate is slashed below projection or the economic recovery is more sluggish than expected (GDP growth
is lower than the market's estimate of 3%). The sector's expected P/E ratio is 9.7x in 2015 and 8.54x in 2016; expected P/E
ratio of TISCO, KTB, BBL, and KBANK are much lower than the sector's average. In addition, KTB's dividend yield is 4.7%
in 2015 and 5.6% in 2016; TISCO grant dividend yield of 6.3% in 2015 and 4.1% in 2016; and BBL's dividend yield is 7.1%
this year and 4.7% next year. We recommend buying BBL and TISCO
2
The media and the property sectors' indices are probably in line with earnings forecast down revisions:
Media L The media sector's index has contracted by 5% in May and 13%ytd, versus our 16.7% earnings forecast down
revision on every company except RS; negative factors have been considerably absorbed. Still, there is risk GDP growth
missing the market's forecast of +3% (and our forecast of 2.5%). FY2015 average expected P/E ratio of 23.78x is still close
to 2014, mainly a decrease some companies: MAJOR (from 33.9x in 2014 to 20.4x in 2015), RS (from 33.9x to 20.4x), VGI
(from 35.6x to 25.6x), and WORK (from 497x to 59x). We recommend buying RS and WORK.
Property The property sector's index has contracted by 3.2% in May and 4.6%ytd, versus our 4.6% earnings forecast
down revision, mainly from SPALI (-22.7%ytd), LPN (-22.5%ytd), QH (-14.7%ytd), and PS (-10.3%ytd) since lower income
was generated in 1Q15 as a result of weak domestic purchasing power. Meanwhile, SENA and AP have rebounded by
56.3%ytd and 22.8%ytd, respectively, thanks to growing earnings.
In contrast, some sectors have declined less than the down revision, i.e. ICT, agribusiness, and food.
ICT Despite a profit forecast down revision of 19.6% (TRUE, DTAC, SIM, and SAMART), the sectorMs index rose 2% in
May and dropped only 5%ytd, possibly because many big-cap stocks in the sector could achieve the profit target: ADVANC
(EPS growth of 18%), THCOM (EPS growth of 29%), and INTUCH (EPS growth of 15.3%). We recommend gradually
accumulating ADVANC and INTUCH for their attractive dividend yields of 6.1% and 7%, respectively, in 2015.
Agribusiness Despite a profit forecast down revision of 13% (up revision for STA from rising product prices but down
revision for GFPT from disappointing earnings in 1Q15), the sectorMs index increased 2% in May and weakened only 6%ytd.
STA has benefited from reviving rubber prices and weak THB for most of its revenues is from export but most of its cost is
in THB. However, most agribusiness stocks have been fully valued except GFPT (P/E ratio increased from 9.2x in 2014 to
13.3x in 2015), so we recommend buying GFPT.
Food Despite a profit forecast down revision of 7.7% (mainly KSL and CPF), the sectorMs index dropped only 4.2%ytd and
stayed unchanged in May. KTIS, a sugar business stock, plummeted 20.5%ytd, while KSL fell 1.9%ytd as a result of
decreasing global sugar prices. TUF and CFRESH declined 9.6%ytd and 8.3%ytd, respectively. CPF also weakened
9.1%ytd in spite of a short-term rebound. On the contrary, TIPCO, CBG, MALEE, and ICHI rose 114%, 24.2%, 18.5%, and
6.4%ytd, respectively. TVO increased 10.7%ytd. Top picks of the sector are TVO, which has low P/E ratio of 10x and high
dividend yield of 8%, and CPF and TUF, which have benefited from weak THB.
Thailand faces largest foreign net sell in 21 days
Foreign investors possessed a net sell position in regional stock markets at around US$147m yesterday. Only South Korea
was with a net buy at US$363m (fifth day), while the other four markets faced continued net selling, led by Taiwan of
US$480m (fifth day, the largest net sell in 34 days), the Philippines of US$23m (fourth day), Indonesia of US$29m (fifth
day), and Thailand of US$50m or B1,688m (fifth day, the largest net sell in 21 days since the beginning of May). On the
other hand, Local institutions bought B1,413m net in Thailand.
For the bond market, local institutions bought B9,463m net, while foreigners sold B4,829m net. THB weakened to
B33.78/US$.
3
Stocks Recommended in Market Talk
Stocks
Start
Date
SPALI
05-Jan-15
Price
Fair Value
Weight
Start
Last
Accumulated
Return
7%
23.43
18.10
-22.7%
PER
2558F
PBV
2558F
Dividend
Yield
Strategist Comment
30-Min Chart
Inexpensive laggard stock with high dividend.
31.96
5.66
1.48
7.15
Backlog making up 80% of FY2015 income target.
FY2016 profit to leap 66% from Bumble Bee
TUF
11-May-15
26.00
14%
20.90
20.20
-3.3%
18.60
1.78
2.69
Share price substantially absorbed negative factor.
Potential strong profit in 2015-2016
IRPC
21-May-15
5.20
7%
4.26
4.12
-3.3%
10.20
1.10
2.43
from Phoenix project.
Benefiting from weak THB.
HANA
03-Jun-15
48.00
16%
43.25
42.25
-2.3%
12.82
1.73
4.14
Lowest P/E among peers, high dividend yield.
Crude oil oversupply subsides.
PTTEP
03-Feb-15
125.00
16%
115.03
107.00
-7.0%
14.13
1.08
4.21
Benefiting petroleum business.
Growing demand, lower cost, high margin,
VNG
09-Apr-15
10.25
13%
7.70
8.35
8.4%
10.18
1.77
3.93
growing profit, developing new products with attractive
growth story.
Benefiting from policy rate cut.
ASK
12-Mar-15
30.10
13%
22.50
19.90
-11.6%
1.60
8.31
8.42
Low P/E ratio, high dividend yield.
HRCI rising countinuously,
RCL
25-Mar-15
14.70
10%
9.10
10.10
11.0%
16.76
0.83
2.98
low fuel cost promotes earnings growth.
Accumulated contribution returns since beginning of the
year
Accumulated returns since our recommendation
SPALI
SPALI-22.7%
-2.9%
-1.5%
ASK
SAMART
SALEE
ASK
-11.6%
-1.4%
-1.4%
-1.4%
PTTEP
SC
TUF
PTTEP
-7.0%
TUF
-0.7%
-0.4%
STPI
IRPC
KBANK
-0.4%
-0.3%
-0.1%
CASH
-3.3%
0.0%
0.1%
0.6%
PTT
M
IRPC
SCC
ROBINS
-3.3%
0.7%
0.8%
0.9%
GUNKUL
HANA
AIT
SYNTEC
-2.3%
1.0%
1.0%
1.2%
PTTGC
VNG
VNG
HANA
8.4%
RCL
1.3%
1.5%
SENA
MCS
TASCO
11.0%
1.6%
2.9%
3.5%
RCL
-20%
-15%
-10%
-5%
0%
5%
10%
15%
4.7%
-4%
-3%
Accumulated returns
Port
12%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Accumulated returns since beginning of the year
SET
Port
11.13%
SET
20%
10%
15%
8%
10%
6%
4%
5%
2%
0.60%
0%
0%
1-Jun-15
25-May-15
18-May-15
4-May-15
11-May-15
27-Apr-15
20-Apr-15
6-Apr-15
13-Apr-15
30-Mar-15
23-Mar-15
9-Mar-15
16-Mar-15
2-Mar-15
23-Feb-15
9-Feb-15
16-Feb-15
-5%
-1D
2-Feb-15
MTD
26-Jan-15
-1.04%
-0.24%
19-Jan-15
YTD
-0.34%
5-Jan-15
-2%
-0.45%
12-Jan-15
-25%
4