PLENTY OF FACTORS TO ENABLE SET GAIN GROUND
We remain positive on the Thai stock market, targeting the SET Index at 1,750 points due to consistent economic recovery, improved domestic demand and easing macroeconomic pressure including the US yield curve, progress in the US-China trade negotiations and rise in crude prices.
The SET Index is currently not expensive with average market price to earnings ratio in 2019 and 2020, based on Bloomberg consensus, at 14.7 and 13.5 times. We believe the SET Index has risen from its bottom of 1,570 points and investors who bought at that level have received risk compensation.
We expect the SET Index to be relatively steady until the result announcement period passes. Net profit combined for the fourth quarter of 2018 decreased to Bt62.5 billion, down 29 per cent year on year, and by 32 per cent quarter on quarter, about 11 and 18 per cent respectively.
So far, about 85 listed companies have yet to announce their 4Q18 results. If more listed companies announced lower-than-expected net profit, the SET Index may not rise following its regional peers in light of the global situation.
The other risk to earnings results is the new accounting standard conditioning the period of payment to retired people – rising from 300 days to 400 days for those with working period equal or over 20 years. We expect this matter to impact listed companies at the level of 5 per cent if they had allowance provision of 30 per cent in Q418. The effect may be less if a company chose to deduct that part from the shareholders’ equities, as it will not affect its profit/loss reporting.
The major risks are a Fed with a hawkish view, failure in US-China trade talks and local unrest after the election even though the possibilities are low. – Passakorn Linmaneechote, deputy managing director/Research, Kasikorn Securities
UPSIDE LIKELY FOR BOURSE
Last week, listed companies accounting for about 65 per cent of total market capitalisation announced their 4Q18 earnings results, totalling Bt122 billion.
However, when all listed firms have announced their results, combined net profit may come lower than expected at Bt250 billion to Bt260 billion due mainly to stock losses as a result of drops in the prices of commodities, particularly oil-related items.
The market earnings per share (EPS) could slide to Bt103-Bt105, compared to an earlier estimate at Bt108.6. Meanwhile, signs for downward revision of the 2019 EPS target have not appeared. This year’s market EPS growth is forecast at 6.9-8.9 per cent to Bt112.2.
Foreign investors remain positive on the Thai bourse, as more capital has moved from safe-haven assets to risky assets amid signs of a return of foreign investment to the Asian stock markets. In light of lower-than-normal foreign holding of Thai stocks and the upcoming Thai election, there’s a chance for foreign capital, the most important drive, to flow into the Thai stock market. Externally, situations remain positive, especially the US-China trade talks.
The SET Index is estimated to see more upside than downside. It’s a good time to accumulate stocks. We pick stocks with high dividend yield such as LH, BBL, MAJOR, THANI and TTW. – Therdsak Thaveeteeratham, executive vice president / Research, Asia Plus Securities