Investment Strategy Research Division
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Market Talk Investment Strategy Research Division Wednesday, March 14, 2018 Investment Strategy SET Index would still be swinging under 1,800 pts and might test 1,785 pts supportive SET Index 1,809.90 range as long as there is no new supporting factor. Moreover, the closer the XD dates of Change (pts) 9.58 listed companies, the higher the pressure on the market. We recommend single stocks Market Cap (Million B) 71,705 with particular supporting factors such as growth plays (TVO, AH), defensive plays (hospitals BCH, RJH), and chicken exporters as China has approved chicken imports from Thailand for the first time in its history (GFPT, TFG, CPF). Top picks are GFPT(FV@B17) and BBL(FV@B235), which would get positive sentiment after court ordered the NBTC to return bank guarantees to Thai TV . SET Index boosted further by energy, petrochemical plays SET Index yesterday swung up and down, finally rallying near the closing hour and closing at 1,809.90 pts, up 9.58 pts or 0.53% with trading value of B71,678.29m. The market was still Net Buy and Sell by Investor Type (Million B) supported by energy plays, especially PTT (+1.43%) and EA that jumped 12.94% to B48 after Foreign -341.66 being sold for eight days in a row. Petrochemical stocks rallied near the closing hour, led by Proprietary 1,990.74 IVL (+3.32%), IRPC (+4%), and PTTGC (+0.52%). ICT play TRUE([email protected]) went up 2.99%; Institutional 1,434.69 we reiterate SELL because it is still challenging for TRUE to make higher revenue to Retail -3,083.77 compensate for rising cost. Some single stocks went up thanks to speculation during a rebound, e.g. ORI (+10.53%), GLOBAL (+8.45%), and MAKRO (+3.78%). On the contrary, banking stocks dropped and thus weakened SET Index by 2 pts, led by KBANK (-1.72%), BBL (-0.95%), and TMB (-2.04%). Some single stocks went down, e.g. MINT (-3.23%) and HMPRO (-0.69%). SET Index today is expected to take a break within a supportive range of 1,800 pts and a resistance range of 1,817 pts. USD weakens. Political issues having more weight than rising inflation rate U.S. inflation increased to 2.2%yoy in February from 2.1% in Janaury as expected, mainly Porranee Thongyen because of an increase in prices of fuel oil (+20.7%yoy), transportation (+4.5%), housing License No: 004146 (+3.1%), and food and beverage (+1.4%). This would encourage Fed to raise the benchmark Therdsak Thaveeteeratham interest rate at least three times (out of seven remaining meetings) by 0.25% each to 2.25% License No: 004132 by the end of 2018; the first hike is projected at the March 20-21 meeting, which has already Pobchai Phatrawit License No: 052647 been absorbed by the market. At the same time, U.S. Dollar Index has been swinging around Paradorn Tiaranapramote 89-90 pts, mainly due to politic issues: 1) White House chief economic advisor Gary Cohn License No: 075365 announced he would resign if Trump insists on import tariff hike for steel and aluminum and Takit Chardcherdsak 2) Secretary of State Rex Tillerson was fired; these issues would continue to weaken USD License No: 087636 despite rising inflation rate. Yothin Pukongnin Quantitative Analyst Assistance Dubai crude oil price recently slipped to US$61.89. Although USD has weakened, oil Wanapruk Komonwitayatorn oversupply problem has remained, mainly from the US; the Energy Information Administration Economist Assistance English research reports are a rough translation of our Thai-language research products. It is produced The Thai language research reports and information contained therein are compiled from primarily with time efficiency in mind, so that English-English research reports are a rough translation of public data sources and our analysts' interviews with executives of listed companies. our Thai-language research products. It is produced primarily with time efficiency in mind, so that They are presented for informational purposes only and not to be deemed as English-reading clients can see what the main recommendations are from our Thai-language research solicitations to buy or sell any securities. Best attempts have been made to verify team. Given that this is a rough-and-ready translation, Asia Plus Securities Company cannot be held information from these vast sources, but we cannot guarantee their accuracy, adequacy, responsible for translation inaccuracies. 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. ASIA PLUS SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015 SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015" Market Talk Investment Strategy | Research Division (EIA) revise up U.S. 2018 oil production forecast to 10.7 million bpd from 10.59 million bpd. Still,oil oversupply problem would be probably relieved because 1) oil demand would be high amid economic rebound and 2) OPEC and non-OPEC oil producers would be cooperating in oil production cut until December 2018. Dubai price is still expected to stay within US$60-65. This is a good entry point for PTTEP. Thai TV wins guarantee back. Positive sentiment for digital TV operators Yesterday, the Central Administrative Court ordered the National Broadcasting and Telecommunications Commission (NBTC) to return bank guarantees worth B1.5bn to Thai TV, owned by Pantipa Sakulchai, ruling that the NBTC failed to keep promises: the network had problems and transition from analog to digital television was delayed. On March 15, the government will meet the NBTC to discuss remedy measures for digital TV operators, e.g. extending digital TV installment payment for three years or providing 50% digital TV rental subsidy for three years; these measures would be effective by April 2018. This issue would have positive sentiment on 22 working digital TV operators, except TVPool and Loca (owned by Thai TV) that halted operation due to financial problems and thus filed a lawsuit. At the digital TV channels license bid in 2014, 24 channels owned by 17 operators won, including existing players BEC, MCOT, Channel 7, and TRUE (TRUE4U and TNN24). The government earned B50,862m in total (338% higher than the reference prices of B15,045m). Digital TV providers have to pay nine installments in 2014-2022 (extended from seven years) and there would be amortization expense throughout 15-year term; there are also some additional cost: Network rental cost of B170m/year for HD channels and B55m/year for other channels. Satellite rental cost (under must-carry rule) of B12m/year. Annual license fee (2% of revenue). As a result, most digital TV operators faced loss, except WORK, RS, and BEC; MONO has just made profit in a recent few years thanks to rising ratings. Cost from License Fee & Network Rental Million B/year Channel 3 (BEC) Channel 7 WORKPOINT Channel 9 (MCOT) Channel 8 (RS) AMARIN TV MONO ONE (GRAMMY) NOW (NMG) PPTV TRUE4U THAIRATH GMM (GRAMMY) 3SD (BEC) HD SD News Kids Network & Satellite Rental Cost Avg. Amortization Rate Market Talk Investment Strategy | Research Division In the bids for digital TV licenses, all bidders were required to present letters of guarantees (LG) from commercial banks. Of the total 24 licenses, the combined value of letters of guarantees was B35,229m (14 LGs from BBL worth of B21,606m, eight LGs from KBANK worth of B10,940m, and two LGs from BAY, worth of B2,683m). In case that digital TV operators had problems, commercial banks that were the guarantors had to repay the debts instead of the borrowers. This is the factor that has pressured the banking sector over the past period. Accordingly, this ruling of the Administrative Court can be used as an example for other digital TV operators to reduce cost and for the survival of themselves and the commercial banks that are their guarantors. Therefore, the pressure could decrease. Moreover, commercial banks that are the issuers of guarantees and loans for digital TV business have made provision for those debts, though not significantly when compared with total loans of the banks. This could be a positive sentiment that help reduce concerns about doubtful account provision. We recommend speculating BBL and KBANK. For BBL(FV@B235), 2018-2019 net profit growth is estimated at 14.0%yoy and 9.5%qoq, driven mainly by the growth of corporate and SME loans that would benefit from gradually happening mega investments of the government and private sectors. Moreover, AIA will help strengthen fee income growth which used to be the weakness of BBL. Asset quality already bottomed out, and the coverage ratio is high, so lower bad debt reserve expense in 2018. Dividend yield can be expected over 4%p.a. The current share price has 12% upside. For KBANK(FV@B250), net profit is projected to revert to growth of 24.0%yoy in 2018 and 7.5%yoy in 2019, driven by the net loan growth that would improve from 2017 to 5-7%yoy, led by the corporate segment, while the SME segment would show gradual rebound following the economic outlook. Meanwhile, investments for digital banking and FinTech in the next couple years will not significantly increase the cost to income ratio. Asset quality has already bottomed out, so reserve expenses would decrease. The current share price has 9% upside. KCE par-splitting to boost price for short term KCE announced the change in its par value from B1 to B0.50 in order to enhance liquidity; this will be approved at the shareholders' meeting on April 26, 2018.