Investment Strategy

April 9, 2015
Investment Strategy
SET Index has been fluctuating as a result of the weak economy. We recommend stocks that are likely to
outperform the market after Songkran: VNG(FV@B10.25) and ADVANC(FV@B285). Top picks are
VNG(FV@B10.25) and RCL(FV@B13.1) since Howe Robinson Index has risen for the 14th consecutive
week by 5%wow.
SET Index
Change
Market cap (Bm)
1,544.86
-4.67
35,301.81
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
2,015.38
849.18
-1,259.61
-1,604.96
SET Index Sensitivity
(x)8)
(567
14.0x
14.5x
15.0x
15.5x
16.0x
16.5x
17x
18x
A59.:.
pr 15E
58E May
;.<. 15E
58E
1,196
1,239
1,281
1,324
1,367
1,409
1,495
1,580
1,227
1,271
1,315
1,359
1,403
1,447
1,534
1,622
Jun
9=.:.15E
58E
Sep
>.:.15E
58E
Dec
?.<. 15E
58E
1,258
1,303
1,348
1,393
1,438
1,483
1,573
1,662
1,352
1,400
1,448
1,497
1,545
1,593
1,690
1,786
1,446
1,497
1,549
1,601
1,652
1,704
1,807
1,910
Export to remain weak, stay flat from 2014
According to the deputy prime minister, 1Q15 export is projected to make a nine-quarter largest fall of 4%yoy; after dropping
by 3.7% in January and 6.1% in February, it is likely to drop further in March. Still, export would not plunge as severely as
-11.9% in 1996 (the Tom Yum Kung crisis). We initially estimate FY2015 export growth at 3.5%, versus 0.9% in 2014. The
deputy prime minister believe that export has been depressed by worldwide economic deceleration since the Eurozone's
unemployment rate has stayed as high as 10-20% and the U.S. economic growth has remained slow.
Thailand's export is not depressed only by the worldwide economic deceleration but also by its own slowing economy as a
result of internal negative factors, namely loss of confidence on the economic and the political situation. Since three major
economic components, household spending, private investment, and government investment, have stayed weak, the economy
would not rebound as expected. According to forecasts of many financial institutions, Thailand's FY2015 GDP growth is
estimated at 3.8% on average. Standard Chartered, Barlays, Tisco Securities, JPMorgan, HSBC, the National Economics and
Social Development Board (NESDB), and the Fiscal Policy Office (FPO) optimistically projected GDP growth around 3.9-5.1%
(above the average), while Bank of America, ADB, Citigroup, IMF, SCB, and Goldman Sachs expected the growth at around
Porranee Thongyen, CISA
3.4-3.7% (below the average); Kasikorn Research Center projected the growth at 2.8%, lower than others. Similarly, we see
License No: 004146
porranee@asiaplus.co.th that FY2015 GDP growth would be depressed most by export, which have been declining significantly since 2012 and growing
Therdsak Thaveeteeratham less than 1% for more than three years, thus limiting rebound in other economic components. Household spending (50% of
License No: 004132
GDP) has been declining as well, rising only 0.3% on average in 2013-2014. Overall, we may revise down Thailand's FY2015
therdsak@asiaplus.co.th
Pobchai Phatrawit
License No: 052647
pobchai@asiaplus.co.th
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.
GDP growth forecast from 3.5% to 2.5%; projection on goods export would be slashed from 3.5% to 1%. These negative
factors would continue depressing the SET and causing fluctuation.
Foreigners buy net for two days but institutions sell
Yesterday, foreign investors reversed to possess a net sell position in Asia at US$78m (after four-day net buy). Taiwan
faced a net sell of US$222m (the largest net sell since late March) and the Philippines was with a slight net sell (after eightday net buy), while South Korea, Indonesia (sixth day), and Thailand was with a net buy. Foreigners bought net in Thailand
for the second day at US$61.83m or B2,015m (the largest net buy since February 5), resulting in April accumulated net buy
of B1,140m. Still, Thailand is with accumulated net sell of B7,316m on a year-to-date basis.
On the other hand, Thailand faced a institutional net sell of B1,259.61bn (after six-day net buy totaling B10.9bn), thus
depressing SET Index. There are another two working days before the long holiday, so investors need to be cautious of
selling pressure.
ytd
mtd
-5d
-1d
4500
4000
3500
3000
2500
2000
1500
1000
62
222
70
8
0
20
500
-500
Indonesia
Philippines
S. Korea
Taiwan
Thailand
Post-Songkran plays: VNG, ADVANC
We previously recommended pre-Songkran plays with RCL and GUNKUL as top picks (see 'Market Talk' on March 26,
2015). Compared with the market return of 3.2%, GUNKUL outperformed the market with 6% return, while RCL granted only
2.7% return. It is still advisable to hold these stocks, especially RCL, since Howe Robinson Index has risen for the 14th
consecutive week by 5%wow, thus boosting freight rate in the first two weeks of April by 14.5% from the 1Q15 average and
26.5% from the 1Q14 average. Moreover, with low fuel cost (comprising around 20% of total cost) and only 25% hedging,
RCL will significantly benefit from low oil prices, and the company's earnings would grow significantly in 1Q15 and 2Q15 as
well as 2H15. Our FY2015 earnings forecast may be revised up. We recommend accumulating RCL.
According to our quantitative research on the five-year statistics, the SET had 100% probability of granting 3% average
return two or three weeks after Songkran (starting from the first working day of the week after Songkran), and some stocks
had 80-100% probability of outperforming the market. For stocks with high upside, low P/E ratio, and high dividend yields,
top picks are VNG(FV@B10.25) with 100% probability of granting 5.5% average return, ADVANC(FV@B285) with 100%
probability of granting 5.8% average return, SYNTEC(FV@B3.85) with 80% probability of granting 6.5% average return, and
CPF(FV@B32) with 80% probability of granting 6% average return.
VNG(FV@B10.25) Product selling prices have been high as a result of increasing demand, while production costs (e.g.
rubberwood scrap and glue) have been dropping, thus boosting profit remarkably. VNG's FY2015 net profit is estimated to
jump by 42%yoy since the company has been focusing on expanding production lines of high-margin goods.
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ADVANC(FV@B285) 1Q15 net profit is estimated to grow by 1.4%yoy and 5.4%qoq in high season as service revenue
has remained high while SG&A has decreased since no non-recurring tax expense has been recognized like in 4Q14. Its
earnings are expected to drop in 2Q15-3Q15 as a result of low season, and then make the year's peak in 4Q15. Overall,
ADVANC's FY2015 net profit is projected to grow by 16%yoy. The 4G bid would benefit ADVANC most since it would fix the
companyKs weakness of being the sole operator unable to provide 4G network.
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Stocks Recommended in Market Talk
Price
Start
Stocks
Date
Fair Value
Start
Last
Accumula
ted Return
PER
2015F
PBV
2015F
Dividend
Yield
Strategist Comment
30-Min Chart
Inexpensive laggard stock with high dividend.
SPALI
05-Jan-15
31.96
23.15
22.10
-1.7%
6.91
1.81
5.86
AIT
05-Jan-15
53.00
38.20
40.25
5.4%
10.57
2.72
5.11
STPI
05-Jan-15
23.64
19.12
16.20
-4.2%
8.22
2.51
4.63
PTT
08-Jan-15
398.00
355.89
340.00
-3.1%
9.09
1.32
4.12
PTTEP
03-Feb-15
134.00
118.29
116.00
-0.7%
10.94
1.15
3.88
ASK
12-Mar-15
30.10
22.67
19.90
-12.2%
8.31
1.60
8.42
RCL
25-Mar-15
13.10
9.28
9.30
0.2%
21.43
0.78
2.33
GUNKUL
25-Mar-15
38.75
36.03
35.00
-2.9%
56.82
5.75
0.62
Backlog making up 80% of FY2015 income target.
Paying B1.10 dividend; XD date is April 21.
Benefiting from Digital Economy policy.
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.
Benefiting from policy rate cut.
Low P/E ratio, high dividend yield.
Retainer shipping business rebounds significantly
with high return before Songkran.
Agressive investment in solar power panel
and overseas business. Usually high return before
Songkran.
SALEE excluded from portfolio yesterday; VNG included in portfolio today
Accumulated returns since our recommendation
ASK
-12.2%
-4.2%
STPI
-3.1%
PTT
-2.9%
GUNKUL
-1.7%
SPALI
-0.7%
PTTEP
0.2%
RCL
AIT
-15%
-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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