Focus on select stocks with growth momentum

We expect the combined 2016 net profit to stay at Bt883 billion or Bt92.52 per share. In the first nine months of 2016, combined net profit totalled Bt689 billion. It is not difficult to make it to our forecast. Most listed companies with big net profit bases (usually, big market cap) have announced their statements since mid-February. The remainder are those with small profit bases and market cap. Although speculation may occur in these stocks, there will unlikely be any significant changes to the SET Index. 
Next will be the announcement of dividend payment. Most will likely post the ex-dividend sign in April to, maybe, May. Annual dividend payment is expected in the range of Bt450 billion to Bt480 billion, compared to the SET’s market cap at Bt15.39 trillion. Thus, the dividend yield will be around 3.1 per cent per annum. And these dividend stocks become another investment alternative amid low returns on other financial assets. 
A more interesting point is whether or not this year’s net profit estimates will be revised after the 2016 net profit is announced. We expect this year’s estimated net profit to grow 7.85 per cent year on year to Bt952 billion or Bt99.78 per share. The projected figures are based on average Dubai crude price of US$55 per barrel, the baht at 36 per US dollar and Thailand’s estimated gross domestic product growth of 3.5 per cent. Revision of the 2017 net profit estimates will have a direct impact on the targeted SET Index. Its current price-to-earnings ratio is 16 times (compared with the earnings yield gap of 4.75 per cent), which reflects the targeted SET Index at 1,600 points. 
In this period, capital from both foreign and local institutional investors – the two main groups influencing the SET Index – is not expected to flow in. Foreign investment in the Thai bourse is expected to stay at about 2.5 per cent, relatively low, from now to the end of 2017. Foreign exchange risks remain high when the baht stays at 35 per US dollar. We believe there’s no inflow of capital yet. Local institutional investors previously bought and sold with not much trading value, which could not set the market direction during this time. Given the market fundamentals and direction of capital movement as stated above, the SET Index this week is believed to be volatile in the range of 1,550-1,585 points. Focus on select buying of stocks with earnings momentum. Their 4Q16 earnings performance had outstanding growth and they will tend to grow continuously this year. Stock picks: TASCO (fair value@Bt30) and COM7 (FV@Bt14).

Prakit Sirivattanaket
Vice President
Kasikorn Securities
Today, Thai trade figures (exports and imports) in January must be monitored. Markets expect Thai exports to rise 8.20 per cent year on year and 6.20 per cent month on month. Thai imports are expected to increase 12 per cent, up from December’s figure at 10.30 per cent.
If the export figure is better than expected and trade balance and current account balance continue to face surpluses (trade account has been in surplus for 32 consecutive months, while the current account has been in surplus for 27 consecutive months.), speculation on the baht is expected and the baht will appreciate in the short term. 
In the meantime, we have seen the BOT’s reaction to take care of the baht, reflecting the consistent rise in international reserves. (As of February 10, the international reserves stayed at US$180 billion, up $2.64 billion from January end.). Recently, the Bank of Thailand (BOT) governor warned the business sector to be cautious about the baht’s appreciation, saying investors see Thailand as a safe haven, reflected in Thailand’s international reserves, the world’s 12th highest. 
If there are uncertain circumstances or panic, short-term money will be parked in Thailand, which the Thai central bank does not like. When short-term money comes in, the baht appreciates and will not accommodate Thai growth. The BOT has been closely monitoring and making assessment of this situation. There will be more pressure, including sell on facts after earnings announcements, baht fluctuations (depreciation as a result of the US dollar appreciation) on the market in late February.