SET Index moves with volatility under influence of external factors

However, the Stock Exchange of Thailand saw less severe declines on average than in the United States, Europe and Asia last year, given the lowest foreign holding of Thai stocks in 10 years, and recent sharp drops in the SET Index (peak at 1,649.77 on May 21, 2014). Besides, the Thai economy was recovering, driven by government stimulus. However, external factors continued to prompt market volatility last week. 

Soon, 2015 earnings performances will be announced. ASPS Research forecasts combined net profit of Bt706 billion, close to the 2014 figure. In the first nine months of 2015, listed companies recorded net profit of Bt473 billion. Based on the full-year profit estimate, the fourth quarter of 2015 will see combined net profit of no less than Bt233 billion. 

The commercial banking group (10 banks focused on) is projected to post net profit of Bt34.9 billion in 4Q15, down 21.8 per cent quarter on quarter and 29 per cent year on year from rises in seasonal operational expenses, lower gains from disposal of investments, and lower non-performing assets. 

In the construction group, SCC (Siam Cement), its key profit maker, is estimated to book Bt10.5 billion in net profit for 4Q15, up 16 per cent quarter on quarter. However, its expected profit is Bt1 billion lower than the earlier estimate from stock losses and a lower polypropylene-naphtha spread. 

The energy group may not have outstanding performance, as PTT will likely record impaired assets of no less than Bt10 billion for its coal business. Several companies in the group may have to record stock losses consistently. 

The ICT (information and communications technology) group is expected to see its 4Q15 performance steady at close to Bt20 billion despite pressure from the recent auction of telecom licences on the 900-megahertz spectrum, which had not yet been reflected in 4Q15. 

All four industries usually account for 55-60 per cent of listed companies’ combined net profit. If the overall picture indicates gloomy prospects, there is a high chance of seeing listed companies’ 2015 net profit totalling less than Bt700 billion, which will pressure the SET Index in the earnings-announcement period.

The short-term future of the SET Index is not looking bright. In the medium to long term, it’s believed there will be satisfactory returns if profit returns to normal at no less than Bt200 billion per quarter and EPS (earnings per share) is Bt90-Bt95 in 2016. 

With an estimated PER (price-to-earnings ratio) at 15.5 times (based on an earnings yield gap of 5 per cent), the target for the SET Index will be less than 1,400 points, or expected returns of more than 10 per cent. 

There will be some stocks whose returns outperform the market. We focus on domestic plays that pay dividends consistently. SCC provides a dividend yield of 4 per cent per year, PS (Pruksa Real Estate) 4.3 per cent, SC (SC Asset) 6.3 per cent, SEAFCO 4.2 per cent, and ASK (Asia Sermkij Leasing) 7.8 per cent. 

MCS (M.C.S. Steel) is also attractive with dividend yield of 6.2 per cent, and STPI at 5.7 per cent.

 

Prakit Sirivattanaket 

Vice President

KASIKORN SECURITIES

 

From January 11-13, the SET Index had consistent, sharp rebounds by 3.8 per cent, led by a 6.5-per-cent increase in the banking sector, a 5.4-per-cent rise in the petrochemical group and a 3.39-per-cent advance in the energy group. 

These rises came from cover shorts after being sold short heavily earlier, prompting their indices to go down to valuations attractive for speculation on technical rebounds. 

However, such rises will be short, as quick profit-taking may follow, in the banking sector in particular. 

However, the likelihood of quarter-on-quarter and year-on-year contractions in fourth-quarter 2015 performance led to the banking sector’s drops on January 14 and 15. 

Despite big caps’ mishaps, the overall stock market is not that bad. Mid-size and small caps outperformed the market while it dropped, and several stocks rose. Most of them have satisfactory 4Q15 performance. They include GL (Group Lease), COM7 and KCE (KCE Electronics).

We expect investors to speculate on 4Q15 earnings performance. 

Below are our forecasts. 

Improved performers both quarter on quarter and year on year:

Retail group: CPALL*, GLOBAL* (Siam Global House), ROBINS* (Robinson Department Store), CPN* (Central Pattana), KAMART* (Karmarts), BEAUTY* (Beauty Community). 

Construction group: ITD (Italian-Thai Development), STPI*. 

Energy group: PTT, PTTEP (PTT Exploration and Production), TOP* (Thai Oil), BCP* (Bangchak Petroleum), SCN* (Scan Inter), PTG*. 

Construction materials group: SCC* (Siam Cement). 

Alternative energy group: TPCH* (TPC Power Holding), EA* (Energy Absolute), DEMCO, SPCG*.

Communications group: ADVANC* (Advanced Info Service), THCOM* (Thaicom), JAS* (Jasmine International), INTUCH* (InTouch Holdings).

Property group: ORI* (Origin Property), PS* (Pruksa Real Estate), QH (Quality Houses), SC* (SC Asset). 

Transportation group: AOT (Airports of Thailand), AAV (Asia Aviation). 

Finance group: MTLS (Muangthai Leasing), GL. 

Electronic components group: KCE*. 

Entertainment group: PLANB* (Plan B Media).

 

Stock picks for trading on 4Q15 performance: KAMART, TOP, IRPC, BCP, PTG (PTG Energy), TPCH, MTLS, GL, TK, THANI, KCE, SVI, PLANB, SPALI, BH, BA.