SCB Securities sees bright outlook for Thai stocks

“The top picks for the first quarter will be stocks demonstrating strong performance, with growth potential closely linked to the expansion of neighbouring countries, especially when the establishment of the Asean Economic Community [AEC] will be taking effect,” the securities house said yesterday.

The other recommended stocks are Aeon Thana Sinsap (Thailand), Erawan Group and Major Cineplex Group. 

The five companies are in the home renovation, hotels and restaurants, entertainment, automobile, financial services and tourism businesses. 

Asia Aviation (AAV): Profit is expected to increase with interesting stock valuation. It is viewed that the formation of the AEC will help boost tourism, and its prospects would even be better with increasing business. 

Aeon Thana Sinsap (Thailand) (AEONTS): Profit is projected to recover further on the back of loan growth, decreasing loan loss provisions and declining expenses arising from loan loss provisions. The company plans to increase revenues from CLMV (Cambodia, Laos, Myanmar and Vietnam) markets from 1 per cent to 10 per cent in 2020, or average growth of 43 per cent per year. 

Erawan Group (ERW): Pricing has slowly adjusted upward, but is likely to receive benefits from the growth of the tourism industry in the hotel business, which covers all the AEC markets. This factor would help contribute to profit growth. 

Major Cineplex Group (MAJOR): This is an interesting stock for long-term investment due to strong profitability. The company is considering expanding its movie theatre business from 517 to 1,000 theatres by 2020. Revenues from CLMV are expected to increase from 3 per cent currently to 20 per cent in 2020. 

Siam Cement (SCC): The company’s revenues from the Asean market have risen from 12 per cent in 2003 to 22 per cent during the first half of this year with new capacity mostly located in Asean. 

Isara Ordeedolchest, senior vice president of the SCBS Research Group’s Investment Strategy Department, said the Thai stock market in 2015 has been fragile, with the SET Index plunging by more than 12 per cent during the past 12 months due to a lower-than-expected economic recovery, the delay of government budget disbursement and a deterioration in investor and consumer confidence. This was aggravated by falling stock markets globally, and sharp declines in commodity prices. 

Next year, the performance of the Thai stock market is seen as improving amid a clearer direction in positive economic sentiments arising from the government’s economic stimulus measures, and private investment to help boost confidence and attract investors to return to the market. 

Growth will be complemented by a continuously growing tourism industry. The official establishment of the AEC on December 31 will also serve as a good opportunity for Thai investors to expand their investment and consumer bases, particularly in CLMV. 

The Thai stock market is expected to recover next year, with positive factors to support economic strength and stability, which would help revive investment in the stock market to attract both local and foreign investors. 

With the preparation for the establishment of the AEC having taken place for some time, investors may not recognise any abrupt changes, since the market has gradually adjusted. 

However, businesses have realised new investment opportunities, particularly with the expansion of markets for Thai listed companies into the CLMV countries, which have a tendency for higher growth rates than others in the region.