Market Talk Investment Strategy Research Division

Tuesday, June 5, 2018 Investment Strategy SET Index is undergoing correction but likely stand above 1,700 pts. Energy plays are SET Index 1,721.29 falling as global oil prices fall. Worldwide interest rate uptrend would widen spreads for Change (pts) 1.47 Thai banks. Many government projects are making progresses (ready for TOR now), good Market Cap (Million B) 53,420 for contractors and CBM plays. We recommend domestic plays. Top picks are SCC(FV@B600), BBL(FV@B220), and KBANK(FV@227). Net Buy and Sell by Investor Type (Million B) SET Index swings narrowly. Retail plays down but energy plays up Foreign -100.98 SET Index yesterday swung narrowly and closed at 1,721.29 pts, up 1.47 pts or 0.09% with Proprietary -1,802.34 trading value of B53.4bn. Almost every retail stock went down, e.g. CPALL, HMPRO, BJC, Institutional 2,454.80 and BEAUTY; P/E ratio is fairly high now. On the other hands, energy plays rallied, led by Retail -551.47 PTT (+0.49%) and PTTEP (+1.87%). ICT stocks (ADVANC and DTAC) went up. Airport play AOT also closed up despite negative sentiment from the International Air Transport Association's (IATA) down revision on 2018 profit target for the worldwide aviation industry, which also means more limited profit growth for AOT. SET correction is still likely today. Global oil prices are still falling. Interest rate uptrend in Asia is slowing down depreciation of Asian currencies. Advertising spending on TV would drop in the next one month at least, especially in the evening and at night. High inflation rates encourages global interest rate uptrend. Watch India’s meeting today Worldwide interest rate uptrend cycle becomes more and more certain, possibly led by the US (developed economy); some Asian countries already raised their policy rates: US – U.S. leading economic indicators have been strong. The latest unemployment rate made an 18-year low of 3.8%. Thus, Fed fund rate is anticipated to be raised by 0.25% at the next meeting on June 12-13 and then hiked one more time by 0.25% to 2.25% by end-2018. Malaysia – Earlier in 2018, Malaysia raised the interest rate by 0.25% to 3.25% (first time in Porranee Thongyen License No: 004146 four years). Therdsak Thaveeteeratham Philippines – In mid-May 2018, the Philippines raised the interest rate by 0.25% to 3.25% License No: 004132 (first time in four years). Pobchai Phatrawit License No: 052647 Indonesia – Indonesia hiked the interest rate two times in May by 0.5% in total to 4.5% (first Paradorn Tiaranapramote hikes in four years). License No: 075365 Takit Chardcherdsak India – According to 60 economists, there is 40% probability that India's interest rate would License No: 087636 be raised for the first time in four years by 0.25% at the Reserve Bank of India (RBI) meeting Yothin Pukongnin today. A rate hike is most likely at the August meeting (70% chance, according to 44 Quantitative Analyst Assistant economists). Notably, India's inflation rate jumped from 1.5% June 2017 to 4.6% in April 4.6%. Jerdjaras Kaewkua Analyst Assistant Thailand – Thailand's inflation rate was 1.49% in May (higher than) expected, likely to reach Wanapruk Komonwitayatorn 2% in 2H18. Thus, the MPC is likely to raise the interest rate by 0.25% within 2018. Economist Assistant

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Advertising spending mainly around World Cup channels, depressing media plays 2018 FIFA World Cup is coming soon (June 14 - July 15, 2018), having more and more negative sentiment on media plays. Three channels will be able to broadcast World Cup matches, which are Amarin TV, TRUE4U, and Channel 5. Nine companies will help fund the broadcast rights and have rights to air advertisements on these three channels, as follows: 1) Six companies fund B200m: King Power, CP Group, Thai Beverage, BTS, GULF, and KBANK. 2) One company funds B100m: PTTGC. 3) Two companies fund B50m: BCP and CBG. On the other hand, other channels would lose advertisement airtime sales. Most audiences will watch World Cup matches live (19:00 - 01:00) instead of drama series or game shows that can be watched anytime through over-the-top channels, e.g. Youtube, Mello.me (Channel 3), and Bugaboo (Channel 7). Other companies that do not fund World Cup broadcast rights will not be able to air advertisement or even their logos during the World Cup broadcast, thus limiting their advertising and marketing chances. Therefore, agencies will slow down their advertisement broadcast and advertising spending would decrease for a whole week during World Cup. During 2014 Fifa World Cup, advertising spending increased 3.7%mom on average in June- July (from B9.711bn to B10.08bn), staying flat or rising slightly from June-July in other years without World Cup. We reiterate UNDERWEIGHT for the media sector and recommend selling WORK and BEC. Meanwhile, RS(FV@B36) would be limitedly affected since 80% of its income is from the beauty business; buy on weakness. Thinner net sell in Asia Foreign net selling has softened in Asia. Foreign funds possessed a net buying position in the region by US$219m (third day). Only Taiwan was with net buying of US$220m, while the rest faced slight net selling: South Korea at US$32m (after two days of net buying), Indonesia at US$11m, the Philippines at US$5m (14th day), and Thailand at US$3m or B101m. Local institutions still bought B2.45bn net. For the bond market, foreigners still bought B8.13bn (seventh day, totaling B32bn). Local institutions also bought B6.96bn net. Monthly Foreign Fund Flow in Asia Date Indonesia Philippines S. Korea Taiwan Thailand Total 2017 -2,960 1,095 8,268 5,758 -796 11,343 2018 (YTD) -2,934 -977 -2,315 -6,307 -4,142 -16,674 January 2018 132 45 1,963 2,856 -177 4,819 February 2018 -760 -296 -2,598 -3,480 -1,310 -8,444 March 2018 -1,085 -371 -449 -2,089 -352 -4,345 April 2018 -750 -171 -1,213 -2,873 -684 -5,691 May 2018 -460 -174 -262 -1,064 -1,620 -3,580 June 2018 -11 -10 244 343 1 567 Unit: Million US$

Market Talk Investment Strategy | Research Division

Invest 40% in stocks: BBL, KBANK, SCC SET correction would continue due to falling global oil prices and uncertainty about external factors. Meanwhile, Thailand's economy has improved and the MPC has signaled tightening monetary policies, which would slow down foreign fund outflow. SET Index is getting closer to 1,700 pts (15.5x expected P/E ratio), having 6% upside from end-2018 target of 1,815 pts (16.5x P/E ratio). This is a good entry point. We recommend underperforming domestic plays: Banking – Interest income is projected to increase, compensating for falling fee income, since the economic growth has been better than expected and probably promotes 2018 loan growth. The inflation rate may reach 2% in September, so the interest rate is likely to be raised in 4Q18, benefiting banking plays. Construction material and contractor – These sectors would enjoy positive sentiment from progresses in bids of government projects, especially Dao Khanong – Rama 3 highway that would be ready for bid in June, followed by other projects in 2H18. These stocks will be in a spotlight again. We recommend domestic plays, e.g. contractor (CK, ITD), construction material (SCC), and banking (BBL, KBANK, and TCAP). For energy plays, we still like BANPU([email protected]) that has been laggard compared with other overvalued oil stocks PTT and PTTEP.

SET vs Sector Return 2017 SET vs Sector Return 2018 YTD

AGRI -16.1% MEDIA-15.9% INSUR -15.8% ETRON -15.8% ETRON -15.4% FOOD -13.5% STEELS -14.3% CONS -12.7% CONS -14.2% STEELS -12.4% HELTH -6.9% TOURISM -10.8% CONMAT -3.0% AGRI -10.5% FOOD -1.0% BANK -9.8% FIN 6.5% CONMAT -7.4% ICT 11.4% COMM -2.4% SET 13.6% PROP -1.9% BANK 15.3% FIN -1.9% MEDIA 15.8% SET -1.8% ENERG 19.3% ICT -1.5% COMM 21.1% INSUR -1.4% PROP 22.2% AUTO -0.5% AUTO 29.7% TRANS 1.6% TOURISM 33.2% PETRO 4.7% TRANS 37.2% ENERG 5.2% PETRO 42.4% HELTH 13.8% -30% -10% 10% 30% 50% -20.0% -10.0% 0.0% 10.0% 20.0% Source : ASPS Research Source : ASPS Research

Market Talk Investment Strategy | Research Division

Market Talk Top Picks

Start Price Accumulated PER Dividend Stocks Fair Value Weight PBV 2018F Strategist Comment -5 Day Chart Date Avg. Cost Last Return 2018F Yield Save haven amid SET fluctuation, with only 0.68x beta. Promising BCH 25-May-18 19.30 10% 16.38 16.20 -1.10% 37.93 6.11 1.45 growth is foreseen from 2Q18, mainly driven by robust growth in medical tourist volume.

Current backlog of over B72bn is enough to generate income for CK 27-Mar-18 34.00 10% 25.45 26.00 2.16% 21.71 1.82 1.89 the next three years. Continuous bids will be seen this year, good for contractors. The share price has over 40% upside.

Its PF/REIT has over 6%p.a dividend yield. Earnings are projected SPF 28-Feb-18 12.56 30% 23.19 23.20 0.04% 14.50 1.99 6.65 to remain strong thanks to robust tourism in Thailand.

Share price has moderately reflected bad news and there is still BBL 30-May-18 220.00 15% 189.33 189.50 0.09% 10.02 0.85 3.96 benefit from the interest rate uptrend. Top pick of bank sector.

Share price already reflected a decline in fee income and there is KBANK 4-Jun-18 227.17 15% 195.00 196.50 0.77% 12.11 1.24 2.31 still benefit from the interest rate uptrend.

The share price is laggard when compared with peers. Buy and BANPU 1-Jun-18 25.60 10% 21.10 21.20 0.47% 14.79 1.13 3.05 wait for the profit to get back to normal from the coal business as the coal price is high and sales volume has increased.

Laggard big-cap stock benefiting from Thailand's economic SCC 23-May-18 600.00 10% 466.00 452.00 -3.00% 10.32 1.86 4.09 growth. Profit would rebound from 2Q18 on, driven by the cement and the petrochemical businesses.

Yesterday we temporarily excluded ITD and LH from portfolio and increased investment in CK and BBL by 5% and KBANK by 15%

Accumulated returns since our recommendation Accumulated contribution returns since beginning of the year

-3.5% -1.2% -1.2% SCC -3.0% -1.1% -0.9% -0.6% -0.5% -0.2% SPF 0.0% -0.1% -0.1% 0.0% 0.0% 0.1% BBL 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% KBANK 0.8% 0.2% 0.2% 0.2% 0.2% 0.2% CK 2.2% 0.3% 0.3% 0.5% 0.6% -10.0% -5.0% 0.0% 5.0% 10.0% 0.6% 0.7% 1.0% 1.0% 1.2% 1.7% Accumulated returns 2.3% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% Portfolio SET Index

5.0%

3.0% 2.44%

1.0% 0.09%

-1.0% -0.17% -0.33% -0.21%

-1.85% -3.0%

-5.0% YTD MTD -1D

Source: ASPS Research

Equity Calendar

Research Division June 4, 2018 Jun 2018 Monday Tuesday Wednesday Thursday Friday 45678 New listing - Warrant New listing - Derivatives Warrant Par decrease XD XD CWT-W4 68.7637m units, B1 par AP23C1901A 100m units @B1.00 HREIT B9.2618 par (from B9.4508) BTSGIF @B0.20 TCB @B1.00 BEAU23C1901A 100m units @B1.00 TR @B1.15 New listing - Derivatives Warrant BEM23C1901A 100m units @B1.00 XD Conversion AOT13C1811A 120m units @B1.00 HMPR23C1901A 100m units @B1.00 IMPACT @B0.18 XE FPI-W1 1:1w @B2.00 (final) TISC13C1811A 120m units @B1.00 KCE23C1901A 100m units @B1.00 BLAND-W4 1:1w @B2.00 (final, "SP") PTT23C1901A 100m units @B1.00 XE Par decrease PTTE23C1901A 100m units @B1.00 GLAND-W4 1.004:1w @B1.00 (final, "SP") WHART B9.2046 par (from B9.2746) PTTG23C1901A 100m units @B1.00 JCK-W4 1.073:1w @B3.262 (final, "SP") SUPE23C1901A 100m units @B1.00 JMT-W1 1.01345:1w @B17.761 (final, "SP") XE THAI23C1901A 100m units @B1.00 NCL-W2 1:1w @B1.50 (final, "SP") TGPRO-W2 0.40:1w @B0.50 (final, "SP") RWI-W1 1:1w @B1.60 (final, "SP") XD New shares trading BCPG @B0.16 BCPG 2.146m shrs (w) CTARAF @B0.10 CPL 20.945m shrs (std) KPNPF @B0.11 RICHY 69.656m shrs (std) MJLF @B0.22

XE TPOLY-W2 1:1w @B3.00 (final, "SP") TSI-W2 1:1w @B1.20 (final, "SP")

New shares trading AEC 3,550 shrs (w) ECF 37.788m shrs (w) SEAFCO 61.132m shrs (std) TCJ 2.070m shrs (std) TIP 300m shrs (std) 11 12 13 14 15 XD XW XW ABFTH @B2.00 CGD 5 existing : 1CGD-W4 @free MILL 5 existing :1W @free TPIPP @B0.10 MILL-PC 5 existing :1W @free Conversion XE EVER-W3 1:1w @B5.00 Conversion IFEC-W2 1:1w @B25.00 (final, "SP") RML-W4 1.02348:1w @B1.925 (final) ACAP-W1 1.1789:1w @B1.6965 ACAP-W2 1:1w @B6.00 AYUD-W1 1:1w @B39.00 BWG-W4 1:1w @B3.00 NBC-W1 1:1w @B3.00 NDR-W1 1.03:1w @B2.93 NINE-W1 1:1w @B4.00 NMG-W3 1:1w @B1.00 PIMO-W1 1:1w @B1.20 PL-W1 1.011:1w @B3.958 (final) PSL-W1 1:1w @B17.50 (final) TIC-P 1:1 WIIK-W1 1:1w @B5.00 (final) 18 19 20 21 22 XE XD XE Conversion NBC-W1 1:1w @B3.00 (final, "SP") LHK @B0.25 CGH-W2 1.006:1w @B1.59 (final, "SP") EFORL-W3 1:1w @B0.60 NINE-W1 1:1w @B4.00 (final, "SP") EFORL-W4 1:1w @B0.50 Conversion Conversion NMG-W3 1:1w @B1.00 (final) GREEN-W4 1:1w @B1.00 (final) 25 26 27 28 29 Conversion Conversion Conversion Conversion AS-W1 1:1w @B2.00 TGPRO-W2 0.40:1w @B0.50 (final) TPOLY-W2 1:1w @B3.00 (final) EIC-W2 2.32054:1w @B1.00 WHA-W1 10.2396:1w @B3.4181 TSI-W2 1:1w @B1.20 (final) EIC-W3 2.32054:1w @B1.00 EIC-W4 1:1w @B0.15 GLAND-W4 1.004:1w @B1.00 (final) JCK-W4 1.073:1w @B3.262 (final) JMT-W1 1.01345:1w @B17.761 (final) NCL-W2 1:1w @B1.50 (final) PPS-W1 1.20:1w @B0.333 RWI-W1 1:1w @B1.60 (final) SPORT-W5 1:1w @B1.20 SPORT-W6 1:1w @B1.50 SUSCO-W1 1:1w @B4.00 BOT : May-18 Trade July 2018 Monday Tuesday Wednesday Thursday Friday 2 3456 Conversion XE BLAND-W4 1:1w @B2.00 (final) ACAP-W1 1.1789:[email protected] (final, "SP")

Conversion MOC : Jun-18 CPI MPC meeting IFEC-W2 1:1w @B25.00 (final) 910111213 Conversion XD Conversion NBC-W1 1:1w @B3.00 (final) STANLY @B7.00 CGH-W2 1.006:1w @B1.59 (final) NINE-W1 1:1w @B4.00 (final) MPR Press Conference 16 17 18 19 20 XD XW XD VGI @B0.054 BKD 3 existing : 1BKD-W2 @free TMW @B2.55

23 24 25 26 27 XR MACO 5:1n @B2.00 + 2MACO-W2 @free PUBLIC HOLIDAY (Substitutuion for Asarnha Bucha Day) XW MACO 1existing :2MACO-W2 @free NCL 7 exisitng : 1NCL-W3 @free 30 31

PUBLIC HOLIDAY (Substitutuion for H.M. the King's Birthday)

BOT : Jun-18 Trade

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)