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Market Talk
May 13, 2015
Investment Strategy
1Q15 market earnings are a bit disappointing; down revision of forecast is likely. Today top pick is
RCL([email protected]), which posted remarkable earnings; we may also revise up its profit forecast.
SET Index
Change
Market cap (Bm)
1,485.72
-15.58
36,252.33
SET Index vs Policy Rate
SET index
Policy Interest Rate
1800
6
1600
5
1400
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
1200
-1,197.59
-965.99
-701.12
2,864.71
4
1000
3
800
600
2
400
1
200
0
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1Q15 earnings disappointing from slow economy
Companies in the real sector and service sector posted disappointing earnings results, reflecting the subdued domestic
economy. For the property sector, QH([email protected]) announced 1Q15 net profit of B559m, down 11.5%yoy due to lower
revenues from property sales but higher selling and administrative expense. Yet, its earnings are projected to improve in the
rest of the year after transfer of four new condominium projects; presales at end-1Q15 were B4.8bn or 20% of FY2015
target of B24bn. The company also has a plan to launch 30 new projects of B33bn worth. The share price has declined until
an expected P/E ratio is only 8x; upside is high. Therefore, QH is a good choice for accumulating amidst the dull market.
For the ICT sector, sales of mobile phones were far below projection. 1Q15 profit of SIM([email protected]), a subsidiary of
SAMART (SAMART holding 70% stake), dropped 48.6%yoy as a result of decreasing sales from fiercer competition in the
market (low-end mobile phones from China and smartphone sales by three major mobile operators); the sales are projected
to continue declining in the remainder of the year. Accordingly, we revise down our profit forecast by 38% on average. As
the current share price has already reflected the negative factor, we recommend HOLD.
For the parent company SAMART(FV@B41), apart from shrinking profit of SIM, its sales of set top box and antennas were
lower than expected. We are also revising down our forecast.
On the other hand, mobile operators posted strong earnings in 1Q15. 1Q15 net profit of INTUCH(FV@B113) was reported
at B4.1bn, growing 6.7%yoy mainly from B75m Fx gain and its subsidiaries: 1) Shared profit from ADVANC (INTUCH
Porranee Thongyen, CISA
holding 40.45% stake) grew 8.3%qoq because SG&A decreased 11.1%qoq and service revenue (excluding IC) rose by
License No: 004146
[email protected] 4.6%yoy. 2) THCOM's (INTUCH holding 41.14% stake, consolidating financial statement) normalized profit grew by 4%qoq
Therdsak Thaveeteeratham since SG&A dropped by 7.6%qoq. Although income from Thaicom 7 was booked for the first full quarter (starting from
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.
November 2014), the occupancy rate was still at the breakeven point of only 40%. INTUCH's 2Q15-3Q15 earnings are
projected to weaken from 1Q15 since ADVANC's profit would drop in low season while THCOM's profit would grow gradually
(given that the occupancy rate of Thaicom 7 increases from 40% in 1Q15 to 100%). We maintain INTUCH's fair value
(based on ADVANCHs fair value of B285 and THCOMHs fair value of B51) at B113, implying 44.8% upside. Dividend yield
can be expected above 6.5%p.a. We reiterate BUY.
Earnings of global plays have weakened in low season. For KCE(FV@B60), its normalized profit slipped slightly. Despite
increasing orders from both existing and new customers (after a quality test), gross margin dropped from our projection to
28.9% due to higher expenses from the new plant that has not made a breakeven yet. KCE's profit would make a year's low
in 1Q15, and then rebound significantly from now on. The new plant would reach the breakeven point, the business would
enter a high season, and THB would depreciate. We maintain our FY2015-2016 earnings forecast; some key assumptions
may be revised, but KCE's net profit is still expected to grow by 27.4%yoy in 2015 and 19.2%yoy in 2016. In terms of
valuation, P/E ratio is expected to drop from 13.4x in 2015 to 11.2x in 2016 and 9.6x in 2017.
OPEC revises up 2015 demand growth, good for energy plays
The OPEC reported oil-related figures in May and revised up 2015 global crude oil demand growth forecast from 1.17 million
barrels/day in April to 1.18 million barrels/day yesterday, versus 0.96 million barrels/day demand growth in 2014. The OPEC
believed that oil demand of OECD America would increase. According to Short-Term Energy Outlook, the EIA also revised
up 2015 average global crude oil demand by 1.49 million barrels/day to 94.59 million barrels/day and raised U.S. crude oil
price projection from US$52.48/barrel to US$54.32/barrel. The oil oversupply problem has been receding as oil demand and
supply have become more balanced. Latest Dubai crude oil price was US$65.56/barrel, and the YTD average price is
US$54.68/barrel. Under our assumption that 2015 average Dubai crude oil price is US$70/barrel, the average price should
be US$79/barrel for the remainder of the year. The rebound in oil prices is good for energy plays like PTT([email protected]) and
PTTEP(FV@B140).
Greece repays debt in time, but remains at risk
Finally, the meeting of European finance ministers in Brussels regarding Greek debt issue could not reach the conclusion.
Greece managed to repay EUR750m debt to the IMF with money from local entities and emergency reserves. Although it
survived this potential default, its financial status is currently in peril. Greek finance minister admitted that the current
situation may lead Greece to bankruptcy in the next two weeks if the agreement for the final EUR7.2bn installment of
Greece's EUR240bn bailout fund from TROIKA is not made within the end of the extended deadline of June. Greece still
has to repay another EUR1.5bn debt to the IMF by July and EUR3bn debt to the ECB within August. These debt problems
are potential threats that may result in default or Greece exiting Eurozone, but many economists believed that the debt
negotiation would reach an agreement in time. This issue still needs to be monitored very closely.
Foreign net sell continues in TIP countries
Yesterday, foreigners reversed to possess a net sell position in Asia at US$13m. Only Taiwan was with a net buy of
US$113m (third day); South Korea faced a net sell of US$34m (fourth day), so did TIP countries: US$26 in the Philippines
(third day), US$30m in Indonesia (fifth day, resulting in the largest weekly accumulated net sell in the region of US$133m),
and Thailand of US$35m or B1,198m as well as institutional net sell of B701m (after three-day net buy).
For the bond market, institutions bought net at B16,557m, while foreigners sold net at B838m (fourth day), continuously
weakening THB to B33.74/US$.
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Stocks Recommended in Market Talk
Stocks
Start
Date
SPALI
Price
PER
2015F
PBV
2015F
Dividend
Yield
Fair Value
Start
Last
Accumula
ted Return
05-Jan-15
31.96
23.43
18.60
-20.6%
5.82
1.52
6.96
TUF
11-May-15
26.00
20.90
20.70
-1.0%
19.06
1.82
2.62
STPI
05-Jan-15
23.64
16.96
15.60
-8.0%
7.92
2.41
4.81
PTT
08-Jan-15
402.50
341.06
345.00
1.2%
9.73
1.34
4.06
PTTEP
03-Feb-15
140.00
115.03
115.50
0.4%
12.56
1.16
3.90
VNG
09-Apr-15
10.25
7.70
7.70
0.0%
9.39
1.63
4.26
ASK
12-Mar-15
30.10
22.50
19.30
-14.2%
8.06
1.55
8.68
RCL
25-Mar-15
13.10
9.10
9.45
3.8%
21.77
0.79
2.30
SAMART
16-Apr-15
41.00
30.25
25.25
-16.5%
13.72
2.61
3.93
Strategist Comment
30-Min Chart
Inexpensive laggard stock with high dividend.
Backlog making up 80% of FY2015 income target.
FY2016 profit to leap 66% from Bumble Bee
Share price substantially absorbed negative factor.
Potential winner of EPC Contractor bid. Likely to win
other projects too, but share price has not risen yet.
Rebounding crude oil price,
LPG price float benefiting PTT.
Crude oil oversupply subsides.
Benefiting petroleum business.
Growing demand, lower cost, high margin,
growing profit, developing new products with attractive
growth story.
Benefiting from policy rate cut.
Low P/E ratio, high dividend yield.
HRCI rising countinuously,
low fuel cost promotes earnings growth.
Temporarily excluded from portfolio.
Weak earnings. Revised down like SIM.
SAMART temporarily excluded from portfolio; invest more in RCL and TUF
Accumulated returns since our recommendation
SPALI
-20.6%
-16.5%
SAMART
ASK
-14.2%
STPI
-8.0%
TUF
-1.0%
PTTEP
0.4%
VNG
0.0%
PTT
1.2%
RCL
-25%
3.8%
-20%
-15%
-10%
-5%
0%
5%
10%
Note: In calculating returns from a stock we recommended, we use the average price on the day of our recommendation as cost and compare it with the
recent closing price. This will result in accumulative returns until the day we recommend closing the position to take profit or cut loss.
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