Electronics Sector

Electron Sector

Fun flows in continuously, boosting Baht’s 15- year highest appreciation
Baht appreciation has hit 15-year record high after foreign fund inflow streams
continuously into Thailand, mainly as a result of global easing monetary policies
(for instant, Japan’s and the US’). Accordingly, global money supply has
increased and urged fund to flow away from countries with low return into
those with high return instead, especially Asian countries with likely-to-thrive
economy. Currently, Baht has moved within the frame of B28.9-29/USD,
appreciating by 5% MoM which is a pressure upon the electronic part sector.
However, this is still under our forecast, as seen in the average value of Baht
since the beginning of 2013-present which is now B29.73/USD. This is slightly
lower than our projection of B30/USD. With B1 appreciation, we’ve found the
sector’s 2013 net profit to decrease by 3.2%.
SVI gets fewest effects… foreign debt offsets impact toward main business
For every B1 appreciation, there’re effects toward companies under our
coverage as follows. 1) HANA’s profit is projected to decrease the worst
because its revenue is in form of 100% USD. However, the cost is 80% in form
of foreign currencies with no debt (both Baht and USD), so the company’s net
profit would lessen by 3.4%. 2) These are companies arranged by high
impact to low impact: DELTA, CCET, KCE, and SMT. Their revenue bases
are all in form of foreign currencies (mostly USD), except for CCET’s 35% of
revenue which is from Baht. For the cost, they all have it in form of foreign
currencies by 80-90%, with also some foreign debt. Compared with total debt,
the impact from Baht appreciation would be offset and therefore net profits of
the mentioned companies would decrease by 3.3%, 3%, 2.9% and 2.8%
respectively. 3) SVI would be the company with least impact from Baht
appreciation. Although the company’s revenue base is all in form of foreign
currencies (90% of USD, and the rest is EUR), the cost is almost 90% in form
of foreign currencies. Combined with foreign debt at 100% of total debt, impact
from Baht appreciation would be eased quite considerably. SVI’s net profit
would decrease only by 2.6% which is the least among peers (shown on the
following page).
Top pick is still SVI, most immune against Baht appreciation
We still maintain “Neutral” for the electronic part sector due to positive factors
from Thailand’s recovery in electronic part businesses. We choose SVI as a top
pick because its production capacity has nearly restored completely close to the
time before flood crisis. Moreover, the company has extended its market into
products with high margin to enhance gross profitability, boosting the operating
result in 2013-14 to grow more aggressively by 37% p.a. which would help
offset all effects from Baht appreciation.