Big industries’ first-quarter results not outstanding
We have formally entered the period of the first-quarter earnings reports.
Listed companies are required to submit their quarterly financial statements by May 16. This year’s overall net profit is forecast to be in the range of Bt830 billion to Bt840 billion. To reach that figure, 1Q16 net profit should be no less than Bt200 billion.
In late April, we saw some listed companies gradually announce their first-quarter financial statements, and more will be seen this week.
Based on the 1Q16 earnings forecast for four large industries, namely commercial banking, construction materials, energy and ICT (information and communications technology), which together account for 60 per cent of total listed companies’ net profit, the following is observed.
Commercial banking: Ten out of the banks covered by ASPS Research announced a combined net profit of Bt47.5 billion, down 9.2 per cent year on year, but up 9.4 per cent quarter on quarter, and lower than expected. NIM (net interest margin) dropped to 3.08 per cent, compared with 3.12 per cent in the fourth quarter of 2015. NPL (non-performing loans) rose and 1Q16 loan loss provisions were Bt39.6 billion, up 9.8 per cent quarter on quarter. The second quarter of 2016 will see reductions of MLR and MRR (minimum lending and retail rates).
Construction materials: SCC (Siam Cement) is the first in this industry to announce 1Q16 financial statements, with net profit of Bt13.6 billion, or 23-per-cent growth year on year. The earnings results were better than expected. Meanwhile, the estimate of this year’s net profit will not be revised up. Usually, the first quarter records the year’s highest profit. Other construction-material companies will see performance the same as a year earlier.
ICT: This group is expected to see a drop of 20-30 per cent in 1Q16 net profit, given high competition that prompted higher selling expenses and limitations in income. Investment expenses including costs for third-generation cellular licences also rose.
Energy: In 1Q16, based on the average price in March compared with the base in December 2015, slight stock losses may be seen. Meanwhile, PTTEP (PTT Exploration and Production) recorded positive extracurricular figures, which prompted growth. Petrochemicals may see steady profit.
Overall, these large industries do not stand out in their earnings performance. This ensures that 1Q16 will not drive up the SET Index significantly.
Other factors include fund flows. It is believed there will be another opportunity for inflows of foreign capital to the Stock Exchange of Thailand. However, we may have to wait for some time, as capital may move into other assets with higher returns while the US Federal Reserve has not yet raised its interest rates (expected in late 3Q16 or early 4Q16 at the earliest).
In the short term, profit taking from proprietary portfolios may occur, with caution needed.
From early 2016 to the present, their accumulated net buys totalled Bt14 billion, which is higher than normal.
This environment is expected to prompt volatility for the SET Index. Its key support level is 1,380 points and the key resistance level is 1,420 points.
Stocks that could be selected into a portfolio are those with specific positive factors.
Stock picks: RS (fair value Bt14.80), with likely turnaround after cost reduction in digital-TV business and expansion into beauty products; TVO (Thai Vegetable Oil; [email protected]) with 7-per-cent dividend yield despite sharp rises in its price (accumulate it gradually when the price weakens.)
