Market View

 

Another round of bidding for licences on the 900-megahertz spectrum in mid-December will be closely watched, as competition is expected to be more intense. 

The high licence fees as well as another round of capital expenditure could lead to lacklustre performance of the Thai telecom operators in the near to medium term. 

The oil and gas sector also tumbled in tandem with weaker global oil prices. 

Foreign investors sold another Bt11.7 billion net of Thai shares in November, bringing the net sell to Bt120 billion year-to-date.

The Thai economy should stabilise in 2016. We expect trade to remain sluggish, which is in line with other countries in the region. 

Solid engines for the Thai economy are tourism and government infrastructure spending, which should provide support. 

On the external front, increasing geopolitical tensions are expected to undermine the performance of emerging markets, including Thai stocks. 

Major focuses in December are the European Central Bank meeting on the 3rd, Opec (Organisation of Petroleum Exporting Countries) meeting on the 4th, and the Federal Open Market Committee meeting on the 15th and 16th. 

As investors await the outcomes, the market will be volatile. 

We raised concerns on the increasing risks of the Thai stock markets ranging from the sub-par growth of the Thai economy and the high market valuation following weak earnings. 

We still recommend that investors diversify into overseas market, particularly stocks with regular dividend payments. There is a significant increase of interest in income-approach investments, particularly real-estate investment trusts with freehold properties. 

 

Trinity Securities

Research Department

Declines in the SET Index were led by local institutional investors, mainly on falls of communications stocks and the country’s instability issue after people were arrested for allegedly possessing war-grade weapons. 

However, the internal factors could not move foreign capital. 

Such drops are expected to be temporary. The SET Index is expected not to fall through this month’s resistance level at 1,350 points. Our view remains “buy” this week.

The SET Index’ recent drops are viewed to be based on sentiment about internal factors. We retain our view as “buy on weakness”. It’s a good opportunity to accumulate SET50 and SET51-100 stocks with upside above our base prices and positive earnings momentum. 

Stock picks: TOP (Thai Oil), IRPC, SCB (Siam Commercial Bank), TISCO (Tisco Financial Group), TCAP (Thanachart Capital), ROBINS (Robinson Department Store), HMPRO (Home Product Center), LH (Land and Houses).

 

 

Tisco Securities

We further cut earnings estimates for large commercial banks to account for worse-than-expected credit quality and revenues in the third quarter of 2015. Accordingly, we reiterate our preference for mid-to-small banks – TCAP (Thanachart Capital), TMB – for signs of improvement in credit quality and cost of finances (CoF). 

After the sector PBV (price-to-book value) re-rated to 1.1 times versus lower mid-term return on equity of 12 per cent, the risk/reward ratio of large banks is no longer attractive.

Aggregate 3Q15 net profit of Bt43.5 billion for the eight banks under our coverage was in line with our estimates and consensus forecasts. While large commercial banks – BBL (Bangkok Bank), KTB (Krungthai Bank), SCB (Siam Commercial Bank) and KBANK (Kasikornbank) – missed, mid-to-small banks beat our forecasts on credit cost/quality and core revenues (net interest income and fee and service income).

We cut sector earnings estimates by 1 per cent per annum for 2015-17, reflecting earnings downgrades of 3-8 per cent per annum for KBANK and SCB (worse-than-expected credit quality and revenues) and upgrades if 3-11 per cent per annum for other banks (better-than-expected revenues/room to lower CoF). 

While accelerating sector formation of non-performing loans in the third quarter was partly due to seasonally low economic activity (agricultural, exports, tourism), 3Q15’s special mention/restructured loans and post-results management tone hint at further NPL growth in 4Q15.

Because of their limited upside, we have removed CENTEL (Central Plaza Hotel), CPALL and MINT (Minor International) from our top-picks list and instead added DTAC (Total Access Communication) and ROBINS (Robinson Department Store). 

As well as helping ADVANC (Advanced Info Service), the auction of fourth-generation telecom licences this month should benefit DTAC on regulatory-cost savings and help reverse its revenue decline in 4Q15. 

We also expect ROBINS’ same-store sales growth to turn positive in 4Q15 given the reopening of six stores and a pick-up in spending spurred by government stimulus measures. 

The stock is currently trading at a four-year low and is now the cheapest Thai retailer in the sector.