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April 28, 2015
Investment Strategy
1Q15 earnings report of the real sector is still a boost for single stocks, especially those with strong profit
growth. We like VNG(FV@B10.25) and RCL(FV@B13.1). Top pick is RCL; 1Q15 profit is projected to
outperform 4Q14 and 2Q15 profit would make an eight-year high.
SET Index
Change
Market cap (Bm)
1,548.83
-6.63
39,218.37
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
-1,634.91
-170.20
-115.69
1,920.79
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
MPC to keep policy rate at 1.75%, says Bangkok Poll
According to the recent poll released by Bangkok Poll, around 76.2% of the economists believed the Thai GDP growth in
2015 would stand at only 3%, lower than 3.9% expected by the Ministry of Finance; only 9% of the economists believed the
growth would meet the Finance Ministry:s target. About the MPC:s coming meeting on April 29; 84.1% of the economists
projected the MPC to keep the policy rate at 1.75%, while only 4.8% projected the policy rate to be cut to 1.5%.
The poll result is in line with our previous slash of GDP growth forecast by 1% to 2.5%, under an assumption that
the inflation rate is not over 1%, so the policy rate at the end of 2015 would be 1.25% or lower 0.5% from present.
Twice policy rate cut at 0.25% each is foreseen at the five remaining meetings of the MPC in 2015, so at the
upcoming meeting on April 29, there is a 50/50 chance that the policy rate would be kept unchanged or increased.
However, this has insignificant weight on the market; real sector earnings results are playing more important roles
in the present.
FY2015 GDP growth forecast slashed to 2.5% due to lack of supporting factor
We revise down Thailand's GDP growth forecast by 1% from 3.5% to 2.5%, lowering our assumption on every economy
Porranee Thongyen, CISA component except government expenditure, private investment, and service export (see next page). The worldwide economy
License No: 004146
has been weaker than expected; the IMF revised down world FY2015 GDP growth forecast from 3.8% to 3.5%. Thailand's
porranee@asiaplus.co.th
Therdsak Thaveeteeratham leading economic figures did not show good improvement in 1Q15 as well. We estimate Thailand's FY2016 GDP growth at
3.5%.
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.
GDP Growth Forecast
GDP Growth
Expenditure
Private
Government
Investment
Private
Government
Export
Goods
Service
Import
Goods
Service
1Q14
-0.5%
-1.9%
-3.0%
4.2%
-9.3%
-7.4%
-16.6%
-0.5%
0.8%
-4.4%
-8.6%
-12.0%
10.4%
2Q14
0.4%
0.5%
0.2%
1.9%
-6.9%
-7.0%
-6.7%
-0.7%
1.5%
-8.4%
9.2%
-10.8%
0.2%
3Q14
0.6%
1.9%
2.2%
0.4%
2.9%
3.9%
-0.8%
-4.0%
-1.4%
-12.4%
-1.1%
-1.6%
1.3%
4Q14
2.3%
2.4%
1.9%
5.5%
3.2%
4.1%
-0.3%
4.9%
2.8%
11.4%
-0.3%
-0.4%
0.3%
2014
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%
Assumptions
Old
New
2015F
3.5%
2.5%
3.8%
3.2%
3.6%
3.0%
4.5%
4.5%
4.6%
4.3%
4.0%
4.0%
7.0%
5.5%
3.4%
1.0%
3.5%
0.5%
3.0%
3.0%
4.3%
2.0%
4.5%
1.7%
3.5%
3.5%
Source : ASP Research
2016F
3.5%
4.0%
3.5%
6.5%
5.1%
4.5%
7.3%
3.6%
3.4%
4.2%
4.2%
4.0%
5.0%
%yoy
Core Inflation Rate
Dubai Oil Price
THB/USD
Policy Rate
2014F
2015F
2016F
2.40%
1.00%
1.80%
100
70
80
33
33
33
2.00%
1.25%
1.75%
Source : ASP Research
Given that end-2015 inflation rate is 1% and Dubai crude oil price reaches US$70/barrel, net interest rate (policy rate
subtracts inflation rate) is still projected at above +2%, so the MPC is likely to decrease the policy rate further after
previously slashed the rate by 0.25% to 1.75% in March.
Stocks with strong 1Q15 profit recommended
1Q15 earnings of some real sector companies have been reported. 1Q15 net profit of DTAC(FV@B97) was 8.2% better
than expected. Excluding Fx gain, DTAC's 1Q15 normalized profit climbed 21.3%qoq but fell 36%yoy. SG&A (IC excluded)
decreased thanks to lower regulatory cost after DTAC migrated 83% of its total subscribers (versus 72% in 4Q14) from 2G
network to 3G network, compensating for a drop in service revenue (IC excluded). DTAC's 2Q15 profit is expected to stay
flat from 1Q15, and 2H15 earnings are likely to grow slightly from 1H15. Although DTAC develops 4G network on 1800 MHz
spectrum, the spectrum is under a concession system that has higher regulatory cost than a license system, so its earnings
forecast in 2015-2016 may be revised down by 5-10%. Yesterday's closing price had 11.51% upside and dividend yield can
be expected at 5.1%. We recommend holding.
Our revision on 1Q15 earnings forecasts of real sector stocks are shown below:
Up revisions
TOP(FV@B54) TOP's 1Q15 net profit is estimated to make a year's high at B4.3bn, reviving from B6.5bn net loss in 4Q14.
Stock loss in 4Q14 (LCM included) is projected to switch to stock gain in 1Q15, GRM would rise on seasonal effect, BOI tax
benefit is likely to be booked, and Fx gain is expected. Overall, TOP's 1Q15 net profit is estimated to comprise 61% of our
initial FY2015 forecast. We revise up TOP's net profit forecast by 44% in 2015 and 15% in 2016, raising our GRM
assumption from US$4.5/barrel to US$5.5/barrel in 2015 and US$5/barrel in 2016 owing to lower crude oil price. The fair
value is revised up by 12.5%, but since the share price has already reflected the solid fundamental factor, we recommend
holding for 4.1% dividend yield.
AP(FV@B8.1) AP's 1Q15 net profit is estimated to leap by 92%yoy but fall 18%qoq. AP is expected to recognize B5.05bn
income from property sales, mainly horizontal projects from end-1Q15 backlog (before booking income) of B4.58bn; the rest
came from transfers of condominiums continuing from last year. AP's profit is expected to grow for the remainder of 2015
thanks to increasing presales from both horizontal projects and four condominiums that will be available for sales this year.
FY2015 earnings forecast may be revised up to reflect faster pace of profit growth.
Maintain forecasts
ROBINS(FV@B64) ROBINS's 1Q15 net profit is estimated to drop 10%qoq and stay flat from 1Q14 on seasonal effect.
Sales are projected to stay flat since sales from newly-opened branches would not compensate for a drop in same store
sales. Still, ROBINS's earnings are likely to rebound in 2H15 as same store sales are expected to grow by 3%yoy and three
new branches will be opened. Overall, ROBINS's FY2015 profit is expected to jump by 17%yoy.
2
ICHI(FV@B27) ICHI's 1Q15 net profit is estimated to leap 52%yoy. Income is expected to advance thanks to well-received
sales promotion programs, compensating for higher sales promotion expense. Utilization rate has risen from the beginning of
the year to the peak of 70%. ICHI's profit is expected to make a year's high in 2Q15 thanks to high season (very hot
summer) and the launching of Bireley:s. Still, ICHI has to recognize loss from the OEM subsidiary producing goods for
export to Indonesia before making a breakeven in 2017. Overall, we maintain ICHI's earnings forecast, projecting FY2015
normalized profit to grow by 11.4%yoy.
Down revisions
STEC(FV@B26.43) STEC's 1Q15 net profit is estimated to fall 18%qoq and 7%yoy. It has just signed a contract for SPP
power plant and is currently making a preparation, thus decreasing its income. Bids for both government and private projects
were delayed, so the company would be waiting for auctions taking place in 2H15. Gross margin is expected to fall due to
low-margin projects. We recommend HOLD as we may revise down STEC's earnings forecast.
Fierce foreign net sell in TIP, especially Indonesia, but net buy and sell in Thailand
Yesterday, foreign investors were still net buyers in Asian stock markets for the eighth consecutive day with the value of
US$713m. While Taiwan was with a net buy of US$738m (fifth day) and South Korea was with a net buy of US$219m (15th
day), TIP countries faced net sell: US$173m in Indonesia (the largest net sell since December 24, 2014, depressing JCI by
3.5%), US$17m in the Philippines, and US$50m (or B1,635m) in Thailand.
Speaking of the bond market, foreign investors switched a position to net buyers again at B1,496m. Yet, THB weakened to
B32.62/US$; fund has probably flown out from Thailand as investors are waiting for the outcome of the upcoming FOMC
meeting on April 28-29 and the MPC meeting on April 29.
Mln USD
ytd
mtd
-5d
-1d
8,000
7,000
6,000
5,000
4,000
3,000
-1,000
50
173
-
219
18
1,000
735
2,000
Indonesia
Philippines
S. Korea
Taiwan
Thailand
3
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
20.80
-11.2%
6.51
1.70
6.22
TASCO
21-Apr-15
15.20
12.70
14.80
16.5%
13.63
3.08
0.20
STPI
05-Jan-15
23.64
16.96
16.90
-0.4%
8.58
2.61
4.44
PTT
08-Jan-15
398.00
341.06
362.00
6.1%
9.68
1.40
3.87
PTTEP
03-Feb-15
134.00
115.03
120.00
4.3%
11.32
1.19
3.75
VNG
09-Apr-15
10.25
7.70
8.15
5.8%
9.94
1.72
4.02
ASK
12-Mar-15
30.10
22.50
21.00
-6.7%
8.77
1.69
7.98
RCL
25-Mar-15
13.10
9.10
9.90
8.8%
22.81
0.83
2.19
SAMART
16-Apr-15
41.00
30.25
31.50
4.1%
17.12
3.26
3.15
Backlog making up 80% of FY2015 income target.
Domestic rubber demand makes record high.
Revise up forecast by 45%. BUY.
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
SPALI
-11.2%
ASK
-6.7%
STPI
-0.4%
SAMART
4.1%
PTTEP
4.3%
VNG
5.8%
PTT
6.1%
RCL
8.8%
TASCO
-15%
16.5%
-10%
-5%
0%
5%
10%
15%
20%
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.
4