CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

Thematic (Sector/Industry)

<ul>
<li>We highlight 14 stocks in Thailand that look interesting to us based on our FVMR Methodology</li>
<li>Portfolio changes: Six stocks remain, eight new join the fray</li>
<li>Since inception, it has gained 121% versus the SET 100 Index’s return of 20%</li>
</ul>


We highlight 14 stocks in Thailand that look interesting to us based on our FVMR Methodology
Portfolio changes: Six stocks remain, eight new join the fray
Since inception, it has gained 121% versus the SET 100 Index’s return of 20%


The Stocks to Own in Thailand – Vol. 45

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

In the review, we look at the distressed Thai aviation industry from four key angles. While there is considerable upside to be had from a sectoral turnaround, survival of most local carriers, with the exception of Bangkok Airways, is really at risk, and neither the government nor private sector may be up to the task of rescuing them:<ul>
<li>
The existential crisis. With Bt330bn of debts in default, Thai Airways is the largest bankruptcy in Thai history, 5.5x the size of TPI's case in 1997. Former subsidiary Nok Air and archrival Air Asia are also restructuring. There's no guarantee any of them will survive the crisis.</li>
<li>
The rescue plans &amp; finances involved. Thai Airways will spend Bt3bn hiring Advisors (Baker &amp; Mckenzie, E&amp;Y, and Finansia). The industry will lay off close to 10,000 people (if not more) to cut costs and are now looking for Bt17bn in soft loans. Even in the best case, THAI probably will need 5 years to get back to profitability...if it survives.</li>
<li>
Reliance on domestic travel and non-core revenues. With international tourism basically dried up, airlines increasingly rely on domestic travel, but that hardly fills their collective fleet of 200 planes. With THAI and NOK at negative equity and AAV at 3.5x gearing, they make money wherever they can now in the short term, ignoring all impact on image.</li>
<li>
International travel recovery. In the long run, international tourism recovery is vital. If the three carriers disappear, it could be a windfall for Bangkok Airways and foreign airlines like Emirates. </li>
</ul>

In the review, we look at the distressed Thai aviation industry from four key angles. While there is considerable upside to be had from a sectoral turnaround, survival of most local carriers, with the exception of Bangkok Airways, is really at risk, and neither the government nor private sector may be up to the task of rescuing them:

The existential crisis. With Bt330bn of debts in default, Thai Airways is the largest bankruptcy in Thai history, 5.5x the size of TPI's case in 1997. Former subsidiary Nok Air and archrival Air Asia are also restructuring. There's no guarantee any of them will survive the crisis.

The rescue plans &amp; finances involved. Thai Airways will spend Bt3bn hiring Advisors (Baker &amp; Mckenzie, E&amp;Y, and Finansia). The industry will lay off close to 10,000 people (if not more) to cut costs and are now looking for Bt17bn in soft loans. Even in the best case, THAI probably will need 5 years to get back to profitability...if it survives.

Reliance on domestic travel and non-core revenues. With international tourism basically dried up, airlines increasingly rely on domestic travel, but that hardly fills their collective fleet of 200 planes. With THAI and NOK at negative equity and AAV at 3.5x gearing, they make money wherever they can now in the short term, ignoring all impact on image.

International travel recovery. In the long run, international tourism recovery is vital. If the three carriers disappear, it could be a windfall for Bangkok Airways and foreign airlines like Emirates. 


Mission Impossible 2021: Rescuing the Thai Airline Industry

Cross Asset Strategy

Initially, the worst part of the pandemic appeared to be behind us in April, but the situation changed in September when waves of infected Burmese workers crossed into Thailand without proper health checks. We address this and other developments in this review, namely:<ul>
<li>
Thailand Focus. At least, four companies provided good perspective to the risk and opportunities created by COVID-19, such as: 1) Entry of Big Tech; 2) high unemployment amongst the young; and 3) market share consolidation.</li>
<li>
Government aid. Prior to his resignation, Finance Minister Preedee Daochai focused on cutting costs for consumers and avoiding more debt, even as his successor focuses on job creation.</li>
<li>
Needle opportunities. The asymmetric global recovery means that demand for medical products such a surgical gloves, needles, and syringes remain very strong. TM and STGT  remains the spotlight. </li>
<li>
Domestic travel has become increasingly important to the sector, accounting for 60-70% in the near term, with rising concentration at top tier hotels who discount.</li>
<li>
Playing the Global Themes. As Europe is hit by a second wave and China re-opens for business, we look at a few Thai stocks that tend to benefit or lose out from global themes in the short to medium term. (Winners: TVO, Asia Soft, TNR. Losers: CRC, MINT)</li>
</ul>

Initially, the worst part of the pandemic appeared to be behind us in April, but the situation changed in September when waves of infected Burmese workers crossed into Thailand without proper health checks. We address this and other developments in this review, namely:

Thailand Focus. At least, four companies provided good perspective to the risk and opportunities created by COVID-19, such as: 1) Entry of Big Tech; 2) high unemployment amongst the young; and 3) market share consolidation.

Government aid. Prior to his resignation, Finance Minister Preedee Daochai focused on cutting costs for consumers and avoiding more debt, even as his successor focuses on job creation.

Needle opportunities. The asymmetric global recovery means that demand for medical products such a surgical gloves, needles, and syringes remain very strong. TM and STGT  remains the spotlight. 

Domestic travel has become increasingly important to the sector, accounting for 60-70% in the near term, with rising concentration at top tier hotels who discount.

Playing the Global Themes. As Europe is hit by a second wave and China re-opens for business, we look at a few Thai stocks that tend to benefit or lose out from global themes in the short to medium term. (Winners: TVO, Asia Soft, TNR. Losers: CRC, MINT)


Thai Corona Crisis (December): The Looming Shadow of Myanmar

Equity Bottom-Up

Five interesting news or developments on our radar screen include:<ul>
<li>
Minor acquires Bonchon, the most famous Korean fried chicken chain in Thailand, in a deal valuing it at Bt2bn. It's an interesting  addition to the Western food portfolio they currently have.</li>
<li>
Excise tax on jet fuel raised more than twenty-folds for LCCs (low-cost carriers) from Bt0.2 to Bt4.72. In the center of this tax storm are AAV and Nok Air and could also blunt AOT's rise in 2020, since many Asian tourists travel to Thailand via LCCs.</li>
<li>
Thai Beverage discussed the listing of its beer unit with an estimated value of US$10bn. MCorp Review believes most of the value will come from SABECO and that this IPO will happen in Singapore, not Thailand.</li>
<li>
IT City acquires CSC for Bt337m. The combination of the electronics and smartphone retailers will see the acquirer's store count more than double.</li>
<li>
Indorama acquires Green Fiber, yet another sustainable PET producer on the US West Coast.</li>
</ul>

Five interesting news or developments on our radar screen include:

Minor acquires Bonchon, the most famous Korean fried chicken chain in Thailand, in a deal valuing it at Bt2bn. It's an interesting  addition to the Western food portfolio they currently have.

Excise tax on jet fuel raised more than twenty-folds for LCCs (low-cost carriers) from Bt0.2 to Bt4.72. In the center of this tax storm are AAV and Nok Air and could also blunt AOT's rise in 2020, since many Asian tourists travel to Thailand via LCCs.

Thai Beverage discussed the listing of its beer unit with an estimated value of US$10bn. MCorp Review believes most of the value will come from SABECO and that this IPO will happen in Singapore, not Thailand.

IT City acquires CSC for Bt337m. The combination of the electronics and smartphone retailers will see the acquirer's store count more than double.

Indorama acquires Green Fiber, yet another sustainable PET producer on the US West Coast.


Snippets #32: MINOR Acquires Bonchon, ThaiBev's New Listing

In this two part series, we apply some of the thoughts of UK-based industry expert Morrel to the Thai airlines industry and try to figure if even the best-in-class ones like AAV is worth a shot. In the first part, some of the key points include:<ul>
<li>
Heightened attention. The industry has regained spotlight with recent news flow of: 1) failed M&amp;A between Air Asia and Nok Air; 2) demand and logistic shocks from India and the Phuket incident; and 3) the Boeing 737 recalls sparked in Ethiopia.</li>
<li>
Governance and foreign ownership. Certain issues that might have come up had the Air Asia-Nok deal gone forward include foreign ownership given Air Asia's Malaysian roots. On the governance side, Thai Airways probably has more serious issues than other rivals in the industry.</li>
<li>
Leased vs. owned fleets. The typical Thai carrier owns most of its fleet compared to only half for most Asian airlines. These cost savings, though tying down capital, are possible for a number of reasons, from state support to strong financials and smaller size.</li>
<li>
Impact of a strong Baht. The Baht's appreciation tends to affect the sector negatively, because it makes tourism more expensive. For Thai Airways, however, its large Japanese debts means it is a net beneficiary of the recent trend.</li>
</ul>

In this two part series, we apply some of the thoughts of UK-based industry expert Morrel to the Thai airlines industry and try to figure if even the best-in-class ones like AAV is worth a shot. In the first part, some of the key points include:

Heightened attention. The industry has regained spotlight with recent news flow of: 1) failed M&amp;A between Air Asia and Nok Air; 2) demand and logistic shocks from India and the Phuket incident; and 3) the Boeing 737 recalls sparked in Ethiopia.

Governance and foreign ownership. Certain issues that might have come up had the Air Asia-Nok deal gone forward include foreign ownership given Air Asia's Malaysian roots. On the governance side, Thai Airways probably has more serious issues than other rivals in the industry.

Leased vs. owned fleets. The typical Thai carrier owns most of its fleet compared to only half for most Asian airlines. These cost savings, though tying down capital, are possible for a number of reasons, from state support to strong financials and smaller size.

Impact of a strong Baht. The Baht's appreciation tends to affect the sector negatively, because it makes tourism more expensive. For Thai Airways, however, its large Japanese debts means it is a net beneficiary of the recent trend.


A Second Look at the Thai Airlines Industry

Thailand

Asia Aviation PCL owns a budget airline.  The airline offers low fare flights, online booking, hospitality packages, and courier and cargo services. Asia Aviation serves travelers throughout Asia, the Middle East, and Europe.

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Asia Aviation (AAV TB)

The Stocks to Own in Thailand – Vol. 45

We highlight 14 stocks in Thailand that look interesting to us based on our FVMR Methodology. Portfolio changes: Six stocks remain, eight new join...

A. Stotz Investment Research

Mission Impossible 2021: Rescuing the Thai Airline Industry

Bangkok Airways might be the only survivor amongst the 4 listed carriers. Short term, Thai aviation relies on domestic tourist, but long term,...

Athaporn Arayasantiparb, CFA

Thai Corona Crisis (December): The Looming Shadow of Myanmar

Just when Thailand is ready to leave the COVID-19 scene, Myanmar pulls them back in with a new outbreak. The Thai government comes up with new...

Athaporn Arayasantiparb, CFA

Snippets #32: MINOR Acquires Bonchon, ThaiBev's New Listing

Five interesting news or developments on our radar screen include: Minor acquires Bonchon, the most famous Korean fried chicken chain in Thailand,...

Athaporn Arayasantiparb, CFA

A Second Look at the Thai Airlines Industry

In this two part series, we apply some of the thoughts of UK-based industry expert Morrel to the Thai airlines industry and try to figure if even...

Athaporn Arayasantiparb, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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