Investment Strategy

March 17, 2015
Investment Strategy
SET Index slipped under 1,530 pts solely from lack of confidence. The market is still keeping an eye on the
Fed meeting on March 17-18. We recommend stocks with low P/E ratio and high dividend yield, e.g.
ASK([email protected]) and SPALI([email protected]). Top pick is HANA(FV@B48) for it is a laggard stock with P/E
ratio of 12x and dividend yield of 4.3%.
YTD Global Returns
Developed Country
30%
20%
1.46%
1.20%
1.10%
Hong kong
Thailand
Malaysia
3.41%
3.99%
6.64%
0.87%
US DJIA
China
1.08%
5%
US S&P
3.62%
10%
6.92%
11.18%
15%
India
Indonesia
UK
Japan
0%
France
711.74
-555.85
-1,969.42
1,813.53
Germany
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
Phillipines
25%
Developing Country
18.45%
1,515.57
-25.98
45,357.76
24.09%
SET Index
Change
Market cap (Bm)
Investors lose confidence in Thai stock market
SET Index has been depressed as investors have lost confidence in the Thai stock market and there has been no positive
factor to support the economy. Household spending (50% of GDP) has stayed flat, slowly recovering from -0.5% in 1Q14
to 0.2-2.2% in 2Q57-4Q57. February consumer confidence dropped for the second consecutive month to 79.1 (previously
rebounding since May 2014 after the political unrest subsided). Passenger car sales plunged 11.4%yoy to make the lowest
in over three years at 23,400. Moreover, B50.1bn VAT was collected in January, dropping 2%yoy (but rising for three
consecutive months and made a one-year high). January motorcycle sales dropped 8.4%yoy (the slowest decrease in 13
months though).
Overall investment (21% of GDP) has been low. Although private investment rose for the first time in December 2014 after
staying flat for nine month, B2-3tr government investment budget has not been disbursed as much as planned. As of 5M15
(October 2014 - February 2015), only 17.92% or B449bn of government investment budget has been disbursed (targeted at
55% by the end of 2Q14), making a five-year low.
Porranee Thongyen, CISA Export has been declining as well. January export dropped by 2.3%yoy (versus 0% in 2014) as a result of trading partners'
License No: 004146
(e.g. Eurozone, Japan, and China) weaker economy. Overall, ThailandAs FY2015 GDP growth is not likely to meet our target
[email protected]
Therdsak Thaveeteeratham of 3.5% as shown below:
License No: 004132
[email protected]
Pobchai Phatrawit
License No: 052647
[email protected]
Assistant Analysts
Kasidej Ratanasomboon
Maraporn Kiwiriyakun
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 pcl 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.
% YoY
%yo
y
22554
0 11
22555
0 12
GDP Growth
C
o ns um
pt io n
private
go
vt. Inv
e s t m
e nt
private
go
vt. E
xp o rt
private

go
vt.
Im
p o rt

private

go
vt.
0.1%
1.3%
1.3%
1.1%
3.3%
7.2%
-8.7%
9.5%
9.1%
11.1%
13.7%
16.1%
2.4%
6.5%
6.8%
6.7%
7.5%
13.2%
14.4%
8.9%
3.1%
-0.4%
19.1%
6.2%
6.5%
4.6%
2556
2 0 13
2.9%
1.1%
0.3%
4.9%
-2.0%
-2.8%
1.3%
4.2%
0.2%
19.7%
2.3%
1.8%
5.2%
2557
2 0 14
0.7%
0.7%
0.3%
2.8%
-2.8%
-1.9%
-6.1%
0.0%
0.9%
-2.8%
-4.8%
-6.3%
3.3%
2558F
20
15 F
3.5%
3.8%
3.6%
4.5%
4.6%
4.0%
7.0%
3.4%
3.5%
3.0%
4.3%
4.5%
3.5%
In line with the BOT governor's seminar "Step up Thai economic development with better productivity: Context in the North"
on March 13, the Thai economy is like a patient with complications: Eurozone, Japan, and China's weak economy (cold),
inadequate investment and technology (osteoarthritis), and lack of confidence. Thus, the BOT may revise down Thailand's
GDP growth forecast from 4.8% to below 4%.
Stocks with over 20% EPS growth, over 5% dividend yield, under 12x P/E ratio recommended
SET Index has plunged near 1,500 pts as investors' confidence declines. However, share prices of many stocks with solid
fundamental factors have dropped until they have significant upside.
Using ASP Smart screening for stocks with over 20% EPS growth, over 5% dividend yield, and under 12x P/E ratio in 2015
and currently over 20% upside, the following four stocks are recommended:
SPALI([email protected]) + SPALI has over 59% upside, above 6.4% dividend yield, and as low as 6.3x P/E ratio. FY2015
earnings are projected to grow by 23%yoy; its current backlog makes up 80% of its FY2015 income target, so it has very
low risk this year. SPALI's profit may slip in 2016 since fewer condominiums will be complete, but likely to rebound again in
2017.
ASK([email protected]) + ASK has nearly 40% upside, 9x P/E ratio, and as high as 7.7% dividend yield. FY2015 earnings are
projected to jump by 25.5%yoy thanks to its aggressive branch expansion in preparation for AEC liberalization and to access
larger customer base with potential business growth. Also, NPL and provision for loss from sales of repossessed cars are
likely to decrease.
STPI([email protected]) + STPI has 38% upside, as low as 8.6x P/E ratio, and 5.3% dividend yield. STPI's earnings are projected
to rebound significantly in 2015 since almost all remaining income from Ichthys project would be booked this year, plus
US$160m from acceleration of the project. There is still risk that LNG Module 6 bid might be delayed as a result of the
global oil price plunge, but STPI is looking for other steel projects to compensate for the delay.
PTTGC([email protected]) + PTTGC has 28% upside, as low as 8x P/E ratio, and 6.2% dividend yield. FY2015 earnings are
estimated to leap by 97.8%yoy since olefins spread would remain high and aromatics spread would stay unchanged due to
decreasing new supply in 2015.
Slight foreign net buy but massive institutional net sell
Yesterday, foreign investors possessed a net sell position in Asia at US$311m (sixth day, increasing over twofold). Taiwan
was with the largest net sell of US$254m (second day, up 65%), followed by Indonesia of US$58m (sixth day, increasing
65%), South Korea of US$12m (switching between net buying and selling for four days), and the Philippines of US$9m
(second day, up 13%). On the contrary, Thailand was with a net buy of US$22m (B712m, second day, rising 12%).
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Foreign fund outflow has continued in Asia; some countries have been with slight net sell while Taiwan has faced massive
selling pressure and Thailand have been with slight net buy for two days. Meanwhile, institutions sold Thai stocks at B2.0bn
(total B5.1bn net sell in March), and foreigners sold Thai bonds for the seventh consecutive day at B1.3bn, weakening THB
to B32.94/US$.
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Stocks Recommended in Market Talk
Stocks
Start
Date
Price
Fair Value
Start
Last
Accumula
ted Return
31.96
23.93
20.1
-13.3%
PER
2015F
PBV
2015F
Dividend
Yield
Strategist Comment
30-Min Chart
B0.65/share dividend; XD date is March 9, 2015.
SPALI
05-Jan-15
6.66
1.75
6.08
Continuous profit growth.
Paying B1.10 dividend; XD date is April 21.
AIT
05-Jan-15
53.00
38.20
39.5
3.4%
10.51
2.70
5.14
STPI
05-Jan-15
26.00
19.12
18.8
-1.7%
8.81
2.78
5.24
Benefiting from Digital Economy policy.
High and consistent
dividend payment.
Rebounding crude oil price,
PTT
08-Jan-15
398.00
MCS
21-Jan-15
9.19
PTTEP
03-Feb-15
SALEE
16-Feb-15
355.89
317
-9.5%
8.66
1.25
4.32
6.68
7
4.7%
8.54
1.33
4.57
134.00
118.29
103
-11.7%
10.09
1.06
4.21
12.20
8.70
8.7
0.0%
21.19
3.71
4.80
LPG price float benefiting PTT.
Paying B0.20 dividend; XD date is April 9.
Turnaround stock benefiting from Olympics in Japan.
Crude oil oversupply subsides.
Benefiting petroleum business.
Remarkable earnings in 2015.
Benefiting from subsidiary listing into SET.
SC
17-Feb-15
4.06
4.00
3.62
-9.6%
9.26
1.21
4.32
ASK
12-Mar-15
30.10
22.95
21.6
-5.9%
9.40
1.81
7.45
HANA
16-Mar-15
48.00
41.41
42
1.4%
11.83
1.60
4.49
Paying B0.08 cash dividend, 8:1 stock dividend
on April 30. Benefiting from policy rate cut.
Revise up fair value.
Benefiting from policy rate cut.
Low P/E ratio, high dividend yield.
Benefiting from low policy rate.
Low P/E ratio, high dividend yield.
Investing in PTT, PTTEP less; switching to HANA(FV@B48)
Accumulated returns since our recommendation
SPALI
PTTEP
SC
PTT
-13.3%
-11.7%
-9.6%
-9.5%
-5.9%
ASK
STPI
-1.7%
SALEE
0.0%
1.4%
HANA
AIT
3.4%
MCS
-15%
4.7%
-10%
-5%
0%
5%
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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