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April 20, 2015
Investment Strategy
China's RRR cut would have positive sentiment on Asian stock markets. Hong Kong and China's stock
markets have significantly outperformed Asian markets last week. We recommend global plays. Today top
picks are VNG(FV@B10.25) and PTT(FV@B398).
SET Index
Change
Market cap (Bm)
1,566.85
-3.15
46,891.51
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
1,554.83
600.38
-1,587.27
-567.93
SET Index Sensitivity
(x)7)
(456
14.0x
14.5x
15.0x
15.5x
16.0x
16.5x
17x
18x
A48.9.
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
8<.9.15E
58E
Sep
=.9.15E
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
China's RRR cut larger than expected, possibly boosting Asian stock markets this week
Concern about global economic deceleration has remained. China's 1Q15 GDP growth was reported at only 7%, the
smallest gain since 2009 (declining since 2010), versus 2014 full-year growth of 7.4%. The IMF projected China;s FY2015
GDP growth at 6.8%. As a result, the People's Bank of China has continued using easing monetary policies. The reserve
requirement ratio (RRR) was reduced for the second time in 2015 totaling by 1% to 18.5% yesterday (after the 0.5% RRR
cut on February 5); the policy rate was previously slashed two times by 0.65% to 5.35% in 2014. In addition, the Chinese
government gave its investors a green light to invest in H-shares (Chinese companies listed on the Hong Kong Stock
Exchange) earlier last week (trading of only Chinese stocks were previously allowed for Chinese investors), having positive
sentiment. Hong Kong's P/E ratio of 13.2x is significantly lower than China's of 17.3x. Therefore, Hong Kong and China's
stock markets have advanced by 14.4% and 11% since early-April, respectively, versus other Asian countries: Thailand
(+4%), the Philippines (+0.1%), and Indonesia (-1.96%). This will have positive sentiment on Asian stock markets as well as
Thailand's. The SET currently lacks solid supporting factors since the economy has been slowing down; the economic
components (household spending, private investment, and government investment) have been weak. Thailand's GDP growth
forecasts have been revised down to 3.8% on average; we lower our projection from 3.5% to 2.5%. (Further detail will be
Porranee Thongyen, CISA given in the near future)
License No: 004146
porranee@asiaplus.co.th
Therdsak Thaveeteeratham
License No: 004132
therdsak@asiaplus.co.th
Pobchai Phatrawit
License No: 052647
pobchai@asiaplus.co.th
Assistant Analysts
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.
Fund flow starts in Asia, thanks to easing monetary policies
Last Friday, foreign investors possessed a net buy position in Asian stock markets at only US$21.6m, with a net sell in
Taiwan, Indonesia (seven-day total of US$234m), and the Philippines (seven-day total of US$141m) and a net buy in South
Korea (nine-day total of US$2,005m) and Thailand. Thailand was with a net buy of US$48m or B1,554m, resulting in
accumulated foreign net sell of B6,645m in April and B1,811m on a year-to-date basis.
Mln USD
ytd
mtd
-5d
-1d
5,000
4,000
3,000
2,000
48
178
137
45
-
22
1,000
-1,000
Indonesia
Philippines
S. Korea
Taiwan
Thailand
The European bond purchases of EUR60bn/month (75% or EUR47.4bn on government bonds, and 25% on covered bonds
and ABS) starting in March is in line with the ECB's target, likely to continue in April and boost worldwide liquidity further.
April accumulated institutional net buy is B9,197m, probably thanks to 38 new trigger funds issued in 1Q15 (14 of which
invest in SET-listed stocks while the rest invest in foreign stocks or other securities). Still, selling pressure is likely since
trigger funds focus on small- and medium-cap and set their market return targets at 5-8%. As SET Index has granted 4%
return since late-March, these funds are likely to sell to take profit before they are closed in the near future.
Political issues: charter content, draft deadline
According to a time frame, the Constitution Drafting Assembly (CDA) must complete the first draft of the constitution by April
17, 2015 and then submit it to the National Reform Council (NRC), the cabinet, and the NCPO for deliberation. It is
projected that the NRC would schedule the first meeting to consider and give suggestion about the charter draft around April
20-26. However, the suggestion is not conclusive and it depends on the decision of the CDA; the NRC can suggest
amendment to the draft until May 25 while the NCPO and the cabinet can suggest amendment to the draft until May 16 and
then the CDA has 60 days to consider and amend the draft. The CDA must complete this process within July 23 and submit
the final draft for the NRC;s approval by August 6. If the draft is approved by the NRC, it will be presented for royal
endorsement. On the contrary, if the draft is rejected, the CDA and the NRC will be dissolved together with the draft and the
NCPO will be entitled to power, according to Section 44 of the interim charter, to make a decision to maintain peace and
order of the country, possibly by amending an old charter for use and holding a general election or commencing the new
charter drafting process all over again, starting from seeking a new set of NCR and CDA.
The issue that will increasingly be in spotlight is the content of the new charter. Criticisms may lit up and increase
political tension. Investors should be cautious.
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Stocks Recommended in Market Talk
Start
Stocks
Date
Price
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
23.43
22.30
-4.8%
7.01
1.84
5.78
AIT
05-Jan-15
53.00
38.25
40.25
5.2%
10.57
2.72
5.11
STPI
05-Jan-15
23.64
16.96
16.80
-0.9%
8.48
2.58
4.49
PTT
08-Jan-15
398.00
341.06
361.00
5.8%
9.49
1.37
3.94
PTTEP
03-Feb-15
134.00
115.03
122.00
6.1%
11.51
1.21
3.69
VNG
09-Apr-15
10.25
7.70
8.25
7.1%
9.88
1.71
4.05
ASK
12-Mar-15
30.10
22.50
19.60
-12.9%
8.31
1.60
8.42
RCL
25-Mar-15
13.10
9.10
9.85
8.2%
22.58
0.82
2.21
SAMART
16-Apr-15
41.00
30.25
29.00
-4.1%
16.17
3.08
3.34
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.
Growing demand, lower cost, high margin,
growing profit, developing new products with attractive
growth story.
Benefiting from policy rate cut.
Low P/E ratio, high dividend yield.
HRCI rising countinuously,
low fuel cost promotes earnings growth.
FY2015 profit to grow 25% owing to digital economy.
New energy business to boost profit by threefold.
Accumulated returns since our recommendation
ASK
-12.9%
-4.8%
SPALI
SAMART
-4.1%
STPI
-0.9%
AIT
5.2%
PTT
5.8%
PTTEP
6.1%
VNG
7.1%
RCL
-15%
8.2%
-10%
-5%
0%
5%
10%
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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