Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Equity Bottom-Up

Bangkok Expressway and Metro / Equity Bottom-Up

<div><div><div><p><strong>Monitoring the virus situation and lockdown</strong><br>BEM reported weak results QoQ in 2Q21 and soft traffic volume YoY in July given the new wave of the pandemic and the lockdown measure to curb the spread. Although the outlook remains uncertain, we maintain our call that traffic and earnings in 2022E will improve sharply upon containment of the outbreak. We thus maintain our Buy call for BEM, with the SOTP-based TP of Bt9.60.</p></div></div></div>

Monitoring the virus situation and lockdown BEM reported weak results QoQ in 2Q21 and soft traffic volume YoY in July given the new wave of the pandemic and the lockdown measure to curb the spread. Although the outlook remains uncertain, we maintain our call that traffic and earnings in 2022E will improve sharply upon containment of the outbreak. We thus maintain our Buy call for BEM, with the SOTP-based TP of Bt9.60.

Earnings Review: Bangkok Expressway and Metro Plc. (BEM)

Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

<p><strong>We maintain BEM with a BUY rating with a target price of Bt9.90 derived from SOTP methodology, which is equivalent to 49.5xPE’22E, 30% discount to Thai transportation sector. A discount due to huge net loss of Airport of Thailand.</strong></p><div>• We expect the company to report net profit of Bt101m in 2Q21. (-67%QoQ -34%YoY), the lowest level in our available data. QoQ and YoY contraction will be chiefly due to impact from 3rd wave of COVID-19 widespread, which trimmed down average daily toll traffic to 770k trips/day (-21%QoQ -4%YoY) and MRT ridership to 119k trips per day (-44%QoQ -11%YoY)</div><div></div><div>• Earnings from core business operation will be under break-even point in 2Q21 onward to 3Q21, but will alleviate with dividend incomes from TTW and CKP. (We estimate dividend income in 2Q21 at Bt271m)</div><div></div><div>• We believe a recent correction in stock price has already priced in poor earnings that will be reported in 2Q21 and 3Q21, impacted by full measure of lockdown in July and most likely to be extended to August. Number of Vaccine rollout and a sign of contraction in number of daily reported patients will be the key catalyst to support stock price in short-term.</div>

We maintain BEM with a BUY rating with a target price of Bt9.90 derived from SOTP methodology, which is equivalent to 49.5xPE’22E, 30% discount to Thai transportation sector. A discount due to huge net loss of Airport of Thailand.• We expect the company to report net profit of Bt101m in 2Q21. (-67%QoQ -34%YoY), the lowest level in our available data. QoQ and YoY contraction will be chiefly due to impact from 3rd wave of COVID-19 widespread, which trimmed down average daily toll traffic to 770k trips/day (-21%QoQ -4%YoY) and MRT ridership to 119k trips per day (-44%QoQ -11%YoY)• Earnings from core business operation will be under break-even point in 2Q21 onward to 3Q21, but will alleviate with dividend incomes from TTW and CKP. (We estimate dividend income in 2Q21 at Bt271m)• We believe a recent correction in stock price has already priced in poor earnings that will be reported in 2Q21 and 3Q21, impacted by full measure of lockdown in July and most likely to be extended to August. Number of Vaccine rollout and a sign of contraction in number of daily reported patients will be the key catalyst to support stock price in short-term.

BEM: Expect Earnings to Remain Dull at Least in 2Q21 and 3Q21

<p><strong>We expect earnings to slightly drop YoY in 1Q21 pressured by a sharp fall in traffic on tollway and mass transit system as a result from partial lockdown in January. The impact will be substantially offset by reduction in amortization cost arises from toll business after concession extended in FEB’20.</strong></p><div>• Expect tollway and MRT traffic to recover from the bottom.</div><div></div><div>• Report 2020 net profit at Bt2bn (-62%YoY). Stripping out gain from divestment, core earnings would be at Bt3.1bn (-34%YoY).</div><div></div><div>• 4Q20 earnings was at Bt570m (-31%QoQ +9%YoY). YoY gain was due to a fall in amortization expense. QoQ fall dragged by dividend paid from TTW in 3Q20.</div><div></div><div>• Revise down 2021-23E earnings by 13-32%</div><p></p><p><strong>We maintain BEM with a BUY rating with a new target price at Bt10.0 (Previous TP: Bt10.60) after revised net profit in 2021-23E down by 13-32%. Our target price derived from SOTP methodology, which is equivalent to 59xPE’21E, 50% discount to Thai transportation sector. A discount due to huge net loss of Airport of Thailand.</strong></p>

We expect earnings to slightly drop YoY in 1Q21 pressured by a sharp fall in traffic on tollway and mass transit system as a result from partial lockdown in January. The impact will be substantially offset by reduction in amortization cost arises from toll business after concession extended in FEB’20.• Expect tollway and MRT traffic to recover from the bottom.• Report 2020 net profit at Bt2bn (-62%YoY). Stripping out gain from divestment, core earnings would be at Bt3.1bn (-34%YoY).• 4Q20 earnings was at Bt570m (-31%QoQ +9%YoY). YoY gain was due to a fall in amortization expense. QoQ fall dragged by dividend paid from TTW in 3Q20.• Revise down 2021-23E earnings by 13-32%We maintain BEM with a BUY rating with a new target price at Bt10.0 (Previous TP: Bt10.60) after revised net profit in 2021-23E down by 13-32%. Our target price derived from SOTP methodology, which is equivalent to 59xPE’21E, 50% discount to Thai transportation sector. A discount due to huge net loss of Airport of Thailand.

BEM: Phases of Recovery and Growth Are Around the Corner

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The SET50 Index is one of the very few indices that is still weighted by full market cap. Stocks need to have a minimum free float of 20% to be eligible for index inclusion but the free float is not used to determine the weight of the stock in the index.</p><p>This had led to stocks with low free floats having an inordinately high weight in the index. The most recent case in point was <a href="https://www.smartkarma.com/entities/delta-electronics-thai-pcl" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thai (DELTA TB)</a> - the stock was an inclusion in the SET50 index at the December review. DELTA is now the third largest stock in the index with a 6.07% weighting, even though the SET free float of the stock is only 22.35%. The stock has jumped 1000% over the last year.</p><p>Media reports now indicate that there are changes brewing that could result in the SET revising the calculation methodology to more accurately determine the free float of stocks, and a change to the calculation methodology of the SET50 Index that would see it move from a full market cap weighted index to a free float market cap weighted index.</p><p>In this Insight, we take a look at the stocks that would be affected by the changes and the impact of passive fund trading on the stocks.</p>

The SET50 Index is one of the very few indices that is still weighted by full market cap. Stocks need to have a minimum free float of 20% to be eligible for index inclusion but the free float is not used to determine the weight of the stock in the index.This had led to stocks with low free floats having an inordinately high weight in the index. The most recent case in point was Delta Electronics Thai (DELTA TB) - the stock was an inclusion in the SET50 index at the December review. DELTA is now the third largest stock in the index with a 6.07% weighting, even though the SET free float of the stock is only 22.35%. The stock has jumped 1000% over the last year.Media reports now indicate that there are changes brewing that could result in the SET revising the calculation methodology to more accurately determine the free float of stocks, and a change to the calculation methodology of the SET50 Index that would see it move from a full market cap weighted index to a free float market cap weighted index.In this Insight, we take a look at the stocks that would be affected by the changes and the impact of passive fund trading on the stocks.

SET50 Index: Change to Free Float Weighting In the Works?

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).

Cross Asset Strategy

<p>Thailand has been one of Asia's worst performers in 2020, but for many of the same reasons, the Thai market will look more attractive in 2021:</p><ul>
<li>
<strong>Low base effects. </strong>An expected economic decline of 8% and earnings decline of 30% (with a quarter of listed companies <em>losing</em> money) has greatly lowered the bar for Thai companies. This makes it very attractive to bet on recovery stories, especially those that have been <em>directly impacted</em> by COVID-19 (such as tourism) and those <em>catering to the rich</em>.</li>
<li>
<strong>Continuation of QE. </strong>In an environment of strong QE action from the United States and other OECD nations, we are not expecting multiples to narrow even as earnings expand. The bias should remain on big caps that can absorb the surge in foreign liquidity.</li>
<li>
<strong>The remote economy </strong>is likely to continue at least for the first nine months, and if there is political instability, it will come in handy as well. We continue to expect broadband Internet providers or anything related to e-commerce and gaming to do well in much of 2021.</li>
</ul>

Thailand has been one of Asia's worst performers in 2020, but for many of the same reasons, the Thai market will look more attractive in 2021:

Low base effects. An expected economic decline of 8% and earnings decline of 30% (with a quarter of listed companies losing money) has greatly lowered the bar for Thai companies. This makes it very attractive to bet on recovery stories, especially those that have been directly impacted by COVID-19 (such as tourism) and those catering to the rich.

Continuation of QE. In an environment of strong QE action from the United States and other OECD nations, we are not expecting multiples to narrow even as earnings expand. The bias should remain on big caps that can absorb the surge in foreign liquidity.

The remote economy is likely to continue at least for the first nine months, and if there is political instability, it will come in handy as well. We continue to expect broadband Internet providers or anything related to e-commerce and gaming to do well in much of 2021.


Thailand

Bangkok Expressway and Metro PCL is a transportation company. The Company combines toll and metro line networks. Bangkok Expressway and Metro is based in Thailand.

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Bangkok Expressway and Metro (BEM TB)

Earnings Review: Bangkok Expressway and Metro Plc. (BEM)

BEM reported weak results QoQ in 2Q21 and soft traffic volume YoY in July given the new wave of the pandemic and the lockdown measure to curb the...

Krungthai XSpring

BEM: Expect Earnings to Remain Dull at Least in 2Q21 and 3Q21

We maintain BEM with a BUY rating with a target price of Bt9.90 derived from SOTP methodology, which is equivalent to 49.5xPE’22E, 30% discount to...

Pi Securities PCL, Thailand

BEM: Phases of Recovery and Growth Are Around the Corner

We expect earnings to slightly drop YoY in 1Q21 pressured by a sharp fall in traffic on tollway and mass transit system as a result from partial...

Pi Securities PCL, Thailand

SET50 Index: Change to Free Float Weighting In the Works?

There is a strong possibility that the SET revises the calculation methodology to more accurately determine the free float of stocks, and changes...

Brian Freitas

Thai Strategy 2021 (Part 1): Key Themes

The theme of the 2021 Thai strategy will be dominated by three things: a recovery story, a QE-inspired preference for big cap, and early-year...

Athaporn Arayasantiparb, CFA

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