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

Equity Bottom-Up

Yesterday analyst meeting came out with a positive tone. We maintain BUY rating with a target price of Bt15.6, which is derived from 33xPE’21E, a 40% premium to Thai Consumer Discretionary.Key takeaway:<ul>
<li>SSSG remains negative at single digit in October 2020. However, we expect SSSG to improve to -1.5% in 4Q20 from -3.7% and -17% in 3Q20 and 2Q20, respectively.</li>
<li>We expect 4Q20 performance to improve QoQ driven by 1) Government stimulus scheme (Shop Dee Mee Kuen) 2) HomePro Expo during 13-22 November 2020 and 3) Margin expansion from better cost control and higher product mix from China.</li>
</ul>We still like HMPRO for its 1) higher profitability compared to peers; 2) SSSG in recovering phase; 3) continuing stores expansion; and 4) long-term growth driver from Omni-channel sales.

Yesterday analyst meeting came out with a positive tone. We maintain BUY rating with a target price of Bt15.6, which is derived from 33xPE’21E, a 40% premium to Thai Consumer Discretionary.Key takeaway:
SSSG remains negative at single digit in October 2020. However, we expect SSSG to improve to -1.5% in 4Q20 from -3.7% and -17% in 3Q20 and 2Q20, respectively.
We expect 4Q20 performance to improve QoQ driven by 1) Government stimulus scheme (Shop Dee Mee Kuen) 2) HomePro Expo during 13-22 November 2020 and 3) Margin expansion from better cost control and higher product mix from China.
We still like HMPRO for its 1) higher profitability compared to peers; 2) SSSG in recovering phase; 3) continuing stores expansion; and 4) long-term growth driver from Omni-channel sales.

HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ

Bright earnings outlook in 2H20<ul>
<li>We maintain positive outlook on home improvement sector.</li>
<li>Earnings improve in 2H20: 2Q20 is the bottom quarter for all home improvement group. We expected 3Q20 earnings to improve QoQ for HMPRO and GLOBAL. While we foresee DOHOME to grow both QoQ and YoY in 3Q20.</li>
<li>Recovery SSSG in 2H20: After re-opening stores, we expected a SSSG improving QoQ in all home improvement group. We forecast Dohome SSSG at 9%YoY in 3Q20 mainly driven Ubon Ratchathani branch which it has low base in 3Q19 due to flooding impact. While we expect other players (ie., GLOBAL and HMPRO) to have negative SSSG according to Construction Materials Price Index (CMI) which is one of the best indicator to tracks SSSG. The CMI continues recover to 104.4 (-2.2%YoY) in August 2020 from a bottom of 103.5 (-4%YoY) in May 2020.</li>
<li>DOHOME is our top picks for 2H20 due to stronger SSSG than peers in 2H20, a rapid stores expansion plan, and cheapest valuation compare to peers.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/185/original/image_61708340921600931078689.png?1600931078" class="editor-image img-responsive" data-smartkarma-image-id="161185"></figure>

Bright earnings outlook in 2H20
We maintain positive outlook on home improvement sector.
Earnings improve in 2H20: 2Q20 is the bottom quarter for all home improvement group. We expected 3Q20 earnings to improve QoQ for HMPRO and GLOBAL. While we foresee DOHOME to grow both QoQ and YoY in 3Q20.
Recovery SSSG in 2H20: After re-opening stores, we expected a SSSG improving QoQ in all home improvement group. We forecast Dohome SSSG at 9%YoY in 3Q20 mainly driven Ubon Ratchathani branch which it has low base in 3Q19 due to flooding impact. While we expect other players (ie., GLOBAL and HMPRO) to have negative SSSG according to Construction Materials Price Index (CMI) which is one of the best indicator to tracks SSSG. The CMI continues recover to 104.4 (-2.2%YoY) in August 2020 from a bottom of 103.5 (-4%YoY) in May 2020.
DOHOME is our top picks for 2H20 due to stronger SSSG than peers in 2H20, a rapid stores expansion plan, and cheapest valuation compare to peers.


We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest home-improvement player in Thailand.
<ul>
<li>We expect 3Q20 earnings to grow to Bt189m (+41%YoY, 29%QoQ) driven by a strong SSSG at 9%, turning profit of Surin branch after one month operation, and improving margin from higher retail sales contribution.</li>
<li>We foresee SSSG at 9%YoY in 3Q20 mainly driven improving contribution from Ubon Ratchathani branch due to low base in 3Q19.</li>
<li>We revised up our sales and net profit forecast by 5% and 12% in 2020E to factor in strong SSSG than our expectation.</li>
</ul>
We still like DOHOME for its 1) cheapest valuation with high growth compared to peers; 2) the positioning of all its stores in locations of high potential demand; 3) plan to expand its store network by 60% within the next two years; and 4) the ample room to grow its margin.

We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest home-improvement player in Thailand.

We expect 3Q20 earnings to grow to Bt189m (+41%YoY, 29%QoQ) driven by a strong SSSG at 9%, turning profit of Surin branch after one month operation, and improving margin from higher retail sales contribution.
We foresee SSSG at 9%YoY in 3Q20 mainly driven improving contribution from Ubon Ratchathani branch due to low base in 3Q19.
We revised up our sales and net profit forecast by 5% and 12% in 2020E to factor in strong SSSG than our expectation.

We still like DOHOME for its 1) cheapest valuation with high growth compared to peers; 2) the positioning of all its stores in locations of high potential demand; 3) plan to expand its store network by 60% within the next two years; and 4) the ample room to grow its margin.

DOHOME: Expect SSSG Stronger than Peers in 2H20 and 2021

We initiate coverage of GLOBAL with a HOLD rating, based on a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the Thailand home-improvement subsector.
The story:
<ul>
<li>Capture potential growth of the ASEAN market.</li>
<li>Renovation of stores suggests positive SSSG outlook.</li>
<li>Store expansion will continue to drive long-term growth.</li>
</ul>
Risks:
<ul>
<li>Economic slowdown</li>
<li>Exchange-rate fluctuation</li>
<li>Highly competitive industry</li>
</ul>

We initiate coverage of GLOBAL with a HOLD rating, based on a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the Thailand home-improvement subsector.
The story:

Capture potential growth of the ASEAN market.
Renovation of stores suggests positive SSSG outlook.
Store expansion will continue to drive long-term growth.

Risks:

Economic slowdown
Exchange-rate fluctuation
Highly competitive industry


GLOBAL: Home-Improvement Player Eyes Opportunities in ASEAN

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.

We have a BUY recommendation on ILM based on a target price of Bt15.20, implying an upside of 22% from the current price. We derive our target price from a DCF-based valuation using a WACC of 6.7% and a terminal growth rate of 2%.
Investment thesis:
<ul>
<li>Customized furniture brand Younique captures modern customer demand</li>
<li>Improved inventory management leads to significant cost cut</li>
<li>Overseas expansion provide future growth opportunities</li>
</ul>
Interim: Despite the temporary closure of its branches following the government’s order to limit the COVID-19 outbreak, ILM’s 2Q20 result was in the black. The 6M20 reported revenue constituted 47% of our previous full year forecast.
Risks: Slowdown in Thai consumer spending, increased competition puts pressure on margins, worsening inventory management, disruptions in supply chain.

We have a BUY recommendation on ILM based on a target price of Bt15.20, implying an upside of 22% from the current price. We derive our target price from a DCF-based valuation using a WACC of 6.7% and a terminal growth rate of 2%.
Investment thesis:

Customized furniture brand Younique captures modern customer demand
Improved inventory management leads to significant cost cut
Overseas expansion provide future growth opportunities

Interim: Despite the temporary closure of its branches following the government’s order to limit the COVID-19 outbreak, ILM’s 2Q20 result was in the black. The 6M20 reported revenue constituted 47% of our previous full year forecast.
Risks: Slowdown in Thai consumer spending, increased competition puts pressure on margins, worsening inventory management, disruptions in supply chain.

ILM: Leader in Home Furnishing Shows Resilience

Thailand

Index Living Mall operates as a leading furniture and home furnishing retailer in Thailand, offering a comprehensive range of furniture, home decorative items, and related products. The company also manages retail rental spaces through community malls under 'The Walk' and 'Little Walk' brands. It was founded in 1994 and is headquartered in Bangkok, Thailand.

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Index Living Mall (ILM TB)

HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ

We expect 4Q20 performance to improve QoQ driven by Government stimulus scheme (Shop Dee Mee Kuen) and Margin expansion from better cost control...

Pi Securities PCL, Thailand

Home Improvement Sector Outlook 2H20

Bright earnings outlook in 2H20 Positive outlook on home improvement group •Earnings improve in 2H20: 2Q20 is the bottom quarter for all home...

Pi Securities PCL, Thailand

DOHOME: Expect SSSG Stronger than Peers in 2H20 and 2021

We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest...

Pi Securities PCL, Thailand

GLOBAL: Home-Improvement Player Eyes Opportunities in ASEAN

We initiate coverage of GLOBAL with a HOLD rating, based on a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the...

Pi Securities PCL, Thailand

ILM: Leader in Home Furnishing Shows Resilience

We have a BUY recommendation on ILM based on a target price of Bt15.20, implying an upside of 22% from the current price. We derive our target...

A. Stotz Investment Research

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