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Market Talk Investment Strategy Research Division
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-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.
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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.
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Investment Strategy
Thursday, November 14, 2019
Bond yields have stayed flat after rallying robustly while gold price has risen, reflecting that fund flow from safe assets to stocks has slowed down. 3Q19 earnings turned out worse than expected. SET Index would still undergo correction. We recommend partly investing in POPF. Top picks are still CPALL(FV@B100) and CPN(FV@B94).
SET Index 1,615.14 Change (pts) -11.06 Market Cap (Million B) 52,456
Watch SET Index signal today
There has been no new positive factors, while 3Q19 earnings mostly turned out worse than expected. SET Index weakened for the entire day and closed at 1,615.14 pts yesterday, down 11.06 pts (-0.68%) with trading value of B52.4bn. The market was mainly weakened by 1) energy plays, especially GULF (-2.05%), EA (-4.47%), BGRIM (-3.79%), and PTTEP (-0.81%), 2) commerce plays, led by CPALL (-1.25%), RS (-2.60%), and BJC (-4.04%), and 3) banking plays, particularly KBANK (-1.32%) and BBL (-1.69%), as well as some big-cap stocks like AOT (-1.57%), MINT (-4.03%), and STEC (-19.55%).
Previously expected to take a positive turn, US-China trade talk has become uncertain, pressuring financial markets; this has slowed down fund inflow from safe assets (bond and gold) to risky assets (stock). Bond yields have stayed flat after rallying robustly, while gold price has rebounded slightly, so fund inflow in stocks would continue to weaken. Meanwhile in Thailand, the government's economic stimulus measures have become more certain. The cabinet approved Chim-Shop-Chai phase 3, while the government is ready to implement additional measures if the economy has not rebounded yet. Still, these measures would only benefit mainly commerce and tourism plays. 3Q19 net profit of 428 SET-listed companies accounting for 83% of market capitalization has been reported at the combined value of B201bn so far, decreasing 1.7%qoq and 18.0%yoy; market earnings turned out worse than expected, so 2019-2020 market earnings have more downside risk. Thus, SET Index today would undergo further correction around 1,610-1,640 pts. We recommend playing it safe with property funds, e.g. POPF. For our portfolio today, we reduce investment in EA by 5% and JWD by 5% while switch to POPF. Top picks are still CPN and CPALL.
Trade war unclear. Fed to keep interest rate flat until 2020
Last week, global stock markets rebounded thanks to positive projection on US-China trade war. However, markets now lack driving force as trade war is still unclear. U.S. President Donald Trump declared that US shall not at a disadvantage in the trade talk with China and the US is ready to resume import tariff hikes against China if the trade deal fails. Meanwhile, according to Wall Street Journal yesterday, China is hesitating about proceeding with importing agricultural products from the US and China has not determined the amount of import yet (US$40-50bn initially expected). We still expect trade war to continue until U.S. presidential election in late-2020.
Net Buy and Sell by Investor Type (Million B) Foreign 557.95 Proprietary -227.86 Institutional -1,712.03 Retail 1,381.93
Therdsak Thaveeteeratham Fundamental Investment Analyst on Capital
Market, Technical Investment Analyst License No: 004132
Paradorn Tiaranapramote Fundamental Investment Analyst on Securities
License No: 075365
Takit Chardcherdsak Fundamental Investment Analyst on Securities
License No: 087636
Jerdjaras Kaewkua Analyst Assistant
Wanapruk Komonwitayatorn Fundamental Investment Analyst on Securities
License No: 110506
Pawat Pattrapong Quantitative Analyst Assistant
Market Talk Investment Strategy | Research Division
US-China trade war pattern
Source: ASPS Research
According to Fed Chairman Jerome Powell's testimony to Congress, current Fed fund rate of 1.75% is an appropriate level, in line with the previous meeting. At the latest Fed meeting in October, Fed cut U.S. interest rate for the third time in 2019 and signaled that it would slow down interest rate cut until mid-2020.
We expect trade war would remain unclear and impact global stock markets, keeping them undergoing correction longer.
SET Index hibernating
Positive projection on US-China trade war truce deal is coming to an end; the market already absorbed this issue. SET Index already rallied more than 60 pts in the short time from 1,580 pts to 1,640 pts at present. However, US-China trade war has become unclear again. China is hesitating about importing U.S. agricultural goods, while the US may resume import tariff hikes if it is at a disadvantage over China.
Selling pressure on safe assets has continued. Similar to bond yields worldwide, Thailand's ten-year bond yield has rallied 20bp from the start of the month (MTD) to 1.71% at present.
Ten-year bond yields of Thailand, the US, Japan, and Germany
Source: Bloomberg / ASPS Research
Tariff Hike Preparation
Preparing tariff hike
Preparing protectionism measures
Actual Tariff Hike
Hiking import tariff
Imposing protectionism measures
Trade Talk
Relieving TensionPostponing next tariff hike
Partly exempting import tariff
Market Talk Investment Strategy | Research Division
Bond selling would slow down from now on as trade war issues are still unclear while bond yields have rebounded back to normal levels. Particularly, Thailand's ten-year bond yield has risen to 1.71%, higher than the key interest rate of 1.25%). Excess liquidity that has recently supported SET Index may slow down.
Thus, SET Index still lacks driving force and has limited upside now. SET Index today is expected around 1,605-1,630 pts, as if it is hibernating. We recommend partly investing in property fund plays with high dividend yield. Particularly, POPF has dividend yield expected at 7.6%p.a. It will pay 3Q19 dividend soon at B0.15; XD date is November 18, 2019.
Firms reporting 3Q19 earnings results
As of yesterday, 3Q19 net profit of 428 SET-listed companies accounting for 83% of market capitalization has been reported at the combined value of B201bn so far, decreasing 1.7%qoq from 2Q19 and 18.0%yoy from 3Q18. Preliminarily, 3Q19 net profit of the banking and agri-food sectors grew both qoq and yoy. In contrast, 3Q19 net profit of the energy-petrochemical, construction material, and electronic part sectors fell both qoq and yoy.
Weak 3Q19 earnings have more and more downside risk on 2019 total net profit (market earnings) forecast of B999bn (or EPS of B100.64); every B10bn decrease in market earnings from our forecast would lower EPS by B1 and weaken market earnings yield gap by 0.05%.
Weak earnings may discourage fund flow from switching from bonds to markets. We recommend cautious selective buying for big-cap domestic plays that has good growth potential in the long term and benefit from economic stimulus measures that are still laggard in terms of prices. Top picks are CPN(FV20@B94) and CPALL(FV20@B100).
Stay away from STEC for short term
Yesterday, the National Anti-Corruption Commission (NACC) found grounds to the accusation that four senior state officials demanded B20m payment from Japan-based Mitsubishi Hitachi Power Systems (MHPS) to allow the ship to temporarily use the dock near Khanom power plant and illegally transport construction equipment parts (power generation parts) for the construction of Khanom power plant. The NACC also founded evidences that STEC and its two executives were guilty of supporting state officials in bribery. After this, the NACC will forward its findings to the Attorney-General to adjudicate the criminal case.
This issue caused STEC plummeted 19.55% yesterday. It has been concerned that STEC might be blacklisted by government organizations and become disqualified for future bidding. Having executives alleged of wrongdoing, it has been concerned that STEC might lose qualification as a SET-listed company. Nevertheless, the NACC's investigation is not the final ruling yet; STEC is still deemed as innocent until the court makes the final judgment. According to the Secretary-General of the Anti-Corruption Organization of Thailand (ACT), a private company that is found guilty by the NACC will not be blacklisted under the
EPS'19F Chg. EPS'19F Yield Gap Chg. Yield Gap
100.64 4.89%
99.64 1 4.84% 0.05%
98.64 2 4.79% 0.05%
97.64 3 4.73% 0.06%
96.64 4 4.68% 0.05%
95.64 5 4.62% 0.06%
Market Talk Investment Strategy | Research Division
Government Procurement and Inventory Management Act B.E. 2560 (2017) and the Public-Private Partnership Act B.E. 2562 (2019).
Still, we believe this issue would not affect STEC's operation. Its current backlog of B90bn is enough to generate revenue until 2023. STEC's financial position is still strong, with cash in hand and investment budget of over B10bn at end-2Q19. However, uncertainty about this case would keep weakening STEC for the short term. Investors with low risk tolerance should stay away from STEC, while investors that are willing to accept higher risk can buy STEC for speculation. 2020 fair value is B25.00.
SET vs Sector Return 2018 SET vs Sector Return 2019 YTD
Source: ASPS Research Source: ASPS Research
5.7%
3.2%
-5.4%
-6.3%
-10.4%
-10.6%
-10.8%
-13.1%
-14.2%
-14.8%
-15.6%
-17.2%
-17.2%
-18.0%
-20.3%
-22.1%
-22.8%
-26.6%
-29.3%
-30.8%
-40% -30% -20% -10% 0% 10%
HELTH
FIN
TRANS
ENERG
PETRO
BANK
SET
COMM
ICT
CONMAT
PROP
AGRI
INSUR
ETRON
AUTO
TOURISM
FOOD
CONS
MEDIA
STEELS
24.9%
24.7%
19.5%
17.1%
14.3%
10.9%
6.2%
3.3%
-3.5%
-4.7%
-6.7%
-8.0%
-13.5%
-14.7%
-16.4%
-16.6%
-17.7%
-24.0%
-26.8%
-29.4%
-40
%
-30
%
-20%
-10
%
0%
10%
20%
30%
FIN
ICT
MEDIA
TRANS
FOOD
ENERG
COMM
SET
INSUR
CONMAT
HELTH
PROP
BANK
AUTO
TOURISM
AGRI
CONS
STEELS
ETRON
PETRO
Market Talk Investment Strategy | Research Division
Market Talk Top Picks
Source: ASPS Research
StartDate Avg. Cost Last
CPALL 11-Nov-19 10% 0.96% 78.25 79.00 100.00 30.94 9.06 1.66
2020 profit would show the biggest growth in three years. Fee income
from services would play more significant roles. The advertising media
deal with PLANB (at 1,000 stores) would make income in 2020.
EA 29-Oct-19 15% -10.47% 47.75 42.75 56.00 26.17 6.46 0.573Q19 net profit grew 16.4%qoq (slightly better than expected), mainly
because normalized profit was driven by the wind turbine business. 4Q19 normal profit is expected to grow further and make a year's high.
LH 26-Sep-19 10% 1.01% 9.90 10.00 12.30 11.62 2.12 7.50Solid integrated property business structure (both for sales and for rent).
Strong shared profit from associates (QH, HMPRO, and LHFG).
TTCL 06-Nov-19 10% 1.41% 7.10 7.20 10.00 5.24 1.32 3.47
TTCL has backlog of B10bn that will generate revenue until 2021. Plus, it
is likely to win biddings for two new projects. The price already
underwent significant correction and has wider upside.
JWD 30-Oct-19 15% -9.57% 9.40 8.50 12.80 25.10 2.80 3.39The government grants tax exemption in EEC areas (Chonburi, Rayong, and Chachoengsao). This would encourage, accommodate, and benefit
logistic business.
STPI 08-Nov-19 10% -2.36% 6.35 6.20 8.30 5.18 1.14 7.26
STPI is expected to show 3Q19 net profit of B500-600m thanks to
compensation gain from an overseas lawsuit. STPI is expected to win
four new projects worth B2-3bn.
AMATA 24-Oct-19 10% -5.63% 25.75 24.30 35.70 14.83 1.85 2.70AMATA has over 11,000 rai of land in EEC areas (the most among
peers). Land backlog makes a new high of B3,750m.
CPN 21-Oct-19 10% 0.39% 64.00 64.25 94.00 25.04 3.99 1.80Still laggard compared with SET Index. CPN is selling leasehold rights in
five malls worth up to B48.6bn to CPNREIT.
KKP 16-Oct-19 10% 0.38% 65.50 65.75 79.50 9.19 1.27 6.84
KKP has dividend yield over 6%p.a. Core businesses for the rest of 2019
would be driven by net loan growth (mainly from high-yield loans) and
income from IB deals.
Accumulated contribution returns since beginning of the year
Accumulated returns since beginning of the year
Stocks Fair Value Strategist Comment
Accumulated returns
Accumulated returns since our recommendation
Today we decrease investment in EA by 5% and JWD by 5% but invest 10% more in POPF
WeightDividend
Yield
Accumulated
ReturnPBV 2019F
PER
2019F
Price
1.41%
1.01%
0.96%
0.39%
0.38%
-2.36%
-5.63%
-9.57%
-10.47%
-15.0% -10.0% -5.0% 0.0% 5.0% 10.0%
TTCL
LH
CPALL
CPN
KKP
STPI
AMATA
JWD
EA
INTUCH, -0.14%JMT, -0.15%
QHPF, -0.16%BJC, -0.18%WORK, -0.24%BDMS, -0.24%
TU, -0.26%ERW, -0.28%
DIF, -0.34%PTTGC, -0.41%
AMATA, -0.79%MINT, -0.80%JWD, -0.85%
DCC, -1.03%EA, -1.31%
CK, -1.57%SPALI, -2.15%
BBL, -2.86%
-4% -3% -2% -1%
MCS, 3.38%TASCO, 2.43%
MAJOR, 2.14%WHA, 1.39%
MTC, 1.28%FPT, 1.15%STEC, 1.11%PTTEP, 1.10%
QH, 1.05%TFG, 1.01%PLANB, 1.00%
PTT, 0.89%BCH, 0.87%
SCC, 0.81%RS, 0.80%DRT, 0.78%
CPALL, 0.71%POPF, 0.69%LH, 0.68%
SEAFCO, 0.63%STPI, 0.62%STA, 0.60%JASIF, 0.58%
EASTW, 0.43%KKP, 0.42%M, 0.38%
TPIPP, 0.21%TTCL, 0.20%ROBINS, 0.17%THANI, 0.17%CPF, 0.16%SCCC, 0.15%
ADVANC, 0.06%CPN, 0.05%DTAC, 0.04%KBANK, 0.01%
0% 1% 2% 3% 4%
14.35%
1.51%
-1.88%
3.28%
0.85%
-0.68%-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
YTD MTD -1D
ASPS Portfolio SET Index
-5%
0%
5%
10%
15%
20%
25%
ASPS Portfolio SET Index
Equity Calendar
Research DivisionNovember 14, 2019
Monday Tuesday Wednesday Thursday Friday11 12 13 14 15
XD New listing - Tourism New listing - Energy & Utilities New listing - MAI > Property & Development XD
LHHOTEL @B0.30 S Hotel & Resort (SHR) 3,593.64m shrs, B5.00 par Absolute Clean Energy (ACE) 10,176m shrs, Boutique Corporation (BC) 507m shrs, B1 par CHAYO @B0.0027777
LHPF @B0.13 (IPO 1,437.456m shrs @B5.20) B0.50 par (IPO 1,018m shrs @B4.40) (IPO 167m shrs @B2.86) CHAYO 20 existing: 1STD @free
QHHR @B0.15
SVH @B7.00 New shares trading XD XD Conversion
PPPM 14,442 shrs (w) GLANDRT @B0.18 JASIF @B0.23 MINT-W6 1:1w @B43.00
XR TMILL @B0.08 TCAP-P 1:1
EFORL 4:1n @B0.05 XE TSTE @B0.10
NCL-W3 1.50:1w @B2.40 (final, "SP")
New shares trading
LIT 1,200 shrs (w)
RS 1,004 shrs (w)
18 19 20 21 22
Co's name change XD XD XD XD
Asian Seafoods Coldstorage (ASEAN) > HREIT @B0.19877 B-WORK @B0.188 BKI @B3.00 BGC @B0.09
Asian Sea Corporation (ASIAN) TPRIME @B0.1307 CPNREIT @B0.406 MCS @B0.25 BOFFICE @B0.1632
IMPACT @B0.20 WHA @B0.0815 BSBM @B0.04
XD XN SAAM @B0.025 WHAUP @B0.0925 INSET @B0.035
ATP30 @B0.02 TPRIME @B0.0616 MGT @B0.05
CPNCG @B0.1848 XN XR SRIPANWA @B0.2204
DIF @B0.1656 SPRIME @B0.176 MPG 4:1n @B0.18 SUTHA @B0.03
POPF @B0.1569
PPF @B0.092 Conversion XN
SIRIP @B0.10 AJA-W1 1.30972:1w @B1.527 (final) BOFFICE @B0.0081
XN
ERWPF @B0.0823
Conversion
SAMART-W2 1.014:1w @B14.80
NESDB - GDP 3Q18
25 26 27 28 29
XD XD XD Last trading date XN
AIMCG @B0.1904 BROOK @B0.02 AMATAR @B0.185 CRYSTAL CRYSTAL @b0.1313
AIMIRT @B0.1365 DCC @B0.022 ICN @B0.05
APCS @B0.10 FTREIT @B0.167 SEAFCO @B0.07 XD Conversion
BKKCP @B0.20 HPT @B0.0181 SPI @B0.20 EPG @B0.10 BTS-W4 1.011:1w @B10.384 (final)
LHK @B0.12 IVL @B0.35 TNH @B0.55 CGH-W3 1:1w @B2.00
PTL @B0.36 KAMART @B0.07 Conversion CSC-P 1:1
TFI @B0.136 LPH @B0.075 XE META-W4 1:1w @B3.50 DOD-W1 1:1w @B15.75
SHREIT @B0.0285 MILL-W3 1.099:1w @B2.732 (final, "SP") NUSA-W3 1:1w @B1.00
XR SPC @B0.60 NVD-W1 1.018:1w @B7.86
NBC 2:1n @B0.53 Conversion PACE-W3 1:1w @B0.25
NMG 3:10n @B0.06 XR CHEWA-W1 1:1w @B1.75 (final) SUPER-W4 1:1w @B2.50
CHUO 1:1n @B0.10 TCMC-W2 1:1w @B4.00 (final)
Conversion UKEM-W2 1:1w @B0.50
ECF-W3 1.008:1w @B4.9958 XN
TMB-T1 1:1T @B1.40 (final) SHREIT @B0.0657 BOT : Oct-19 Trade
Monday Tuesday Wednesday Thursday Friday2 3 4 5 6
Conversion ConversionCI-W1 1.0172:1w @B2.1628 NCL-W3 1.50:1w @B2.40 (final)
PUBLIC HOLIDAY
(H.M. the Late King Bhumibol Adulyadej's Birthday
National Day and National Farther's Day)
MOC : Nov-19 CPI
9 10 11 12 13
XD
GOLD @B0.48
PUBLIC HOLIDAY
(Constitution Day)
16 17 18 19 20
XW Conversion
BTS 10 existing: 1BTS-W5 @free MILL-W3 1.099:1w @B2.732 (final)
MPC meeting
23 24 25 26 27
30 31
PUBLIC HOLIDAY
(New Year's Eve)
BOT : Nov-19 Trade
November 2019
December 2019
C = conversion, CB = convertible bonds, PP = private placement, p = preferred shares, w = warrants, n = new, STD = stock dividend, NPG = Non-Performing Group Provided by Amika (ext 1229)