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

<p><strong>Yesterday analyst meeting came out with a positive tone. We expect strong recovery in 2H21, given Europe vaccination progress and improvement performance of food business after easing lockdown in Thailand.</strong></p><div>• The earnings drop in 1Q21 was a result of performance in hotel business, mainly attributed from the new wave of COVID-19 pandemic in Thailand. Also, It was a low season for NH chain hotel.</div><div></div><div>• Meanwhile, a total same store sales growth of food business was -15.3%, which was an improvement for three consecutive quarters from a decline of 36.8% in 2Q20, 17.2% in 3Q20, and 15.5% in 4Q20, driven by a recovery in Australia and China hub.</div><div></div><div>• Trimmed 2021-23E forecast to factor in new wave of COVID-19.</div><div></div><div>• We expect 2Q21 earnings should still be under pressured from the impact of COVID-19 outbreak and lockdown measures. However, we expect its earnings to recover strongly in 2H21.</div><div>
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</div><p><strong>We maintain BUY rating with new rolled-over 2022E target price of Bt36.0 (+13% from previous target price) based DCF method (WACC of 7% and terminal growth of 2%), implying 59.7xPE’22 and 36.6xPE’23 supported by (1) the faster-than-expected COVID-19 vaccinations in many countries across the globe (2) lockdown restrictions loosened in several European countries and (3) capital expenditure reduction.</strong></p>

Yesterday analyst meeting came out with a positive tone. We expect strong recovery in 2H21, given Europe vaccination progress and improvement performance of food business after easing lockdown in Thailand.• The earnings drop in 1Q21 was a result of performance in hotel business, mainly attributed from the new wave of COVID-19 pandemic in Thailand. Also, It was a low season for NH chain hotel.• Meanwhile, a total same store sales growth of food business was -15.3%, which was an improvement for three consecutive quarters from a decline of 36.8% in 2Q20, 17.2% in 3Q20, and 15.5% in 4Q20, driven by a recovery in Australia and China hub.• Trimmed 2021-23E forecast to factor in new wave of COVID-19.• We expect 2Q21 earnings should still be under pressured from the impact of COVID-19 outbreak and lockdown measures. However, we expect its earnings to recover strongly in 2H21.
 
We maintain BUY rating with new rolled-over 2022E target price of Bt36.0 (+13% from previous target price) based DCF method (WACC of 7% and terminal growth of 2%), implying 59.7xPE’22 and 36.6xPE’23 supported by (1) the faster-than-expected COVID-19 vaccinations in many countries across the globe (2) lockdown restrictions loosened in several European countries and (3) capital expenditure reduction.

MINT: Europe Performance Back on Growth Track in 2H21

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Debt Capital Markets

THAI CDS USD SR 5Y D14 / Debt Capital Markets

<p>We initiate our coverage of Thailand’s Thai Baht (THB)-denominated corporate bond market. In the report, we review the country’s THB bond market with a focus on corporate bonds, excluding commercial papers, in terms of market composition, participants (issuers &amp; investors), and rating agencies. We also describe major hindering points for the development of the THB bond market and compare the THB bond market with Singapore’s SGD bond market where we see as the next milestone for the THB corporate bond market.</p>
<p>Here we see the size of THB bond market to be quite small relative to Thailand’s GDP (and bank loans). The fact that individual investors account for the majority of corporate bondholders does not mean individual investors are more interested in investing in bonds or have more access to the corporate bonds than institutional investors. Rather, we believe it is a lack of investment opportunities available to individual investors which has left investors with bonds (other than bank deposits) to invest to receive fixed income. Also, a lack of high-yield bond analysis among institutional investors, an absence of hedge funds, and regulators’ risk averse opinion on high-yield bonds all lead to limited corporate bond holding by institutional investors.  </p>
<p>Our subsequent research report(s) on the THB bond market will reflect on liquidity, valuation (including pricing &amp; benchmark), and benefits/concerns for international investors looking to diversify its bond portfolio and/or seeking to increase exposure in THB financial assets.</p>
<p>We note that a high-yield bond sector on an international scale comprises THB bonds with a rating of A+/A+(Tha)  with lower ratings on Thailand’s national scale (<em>See Rating Agencies sector</em>).  As a result, we aim to cover Thailand’s THB corporate bond market rated A+/A+(Tha) or lower on a national scale by TRIS Ratings and/or Fitch Ratings (Thailand) as well as unrated bonds issued through both public offering and private placements as long as we can obtain sufficient public material information to make recommendations. Our analysis on the rated bonds will be focused on our opinion on the existing local and international rating(s) and expected rating actions. Our analysis on unrated bonds will be, on the other hand, an attempt to suggest how the market should perceive the bonds’ implied credit ratings. In both cases, we aim to provide valuation to help investors make judgments whether they receive sufficient returns for the credit and liquidity risks they are taking on.</p>

We initiate our coverage of Thailand’s Thai Baht (THB)-denominated corporate bond market. In the report, we review the country’s THB bond market with a focus on corporate bonds, excluding commercial papers, in terms of market composition, participants (issuers &amp; investors), and rating agencies. We also describe major hindering points for the development of the THB bond market and compare the THB bond market with Singapore’s SGD bond market where we see as the next milestone for the THB corporate bond market.
Here we see the size of THB bond market to be quite small relative to Thailand’s GDP (and bank loans). The fact that individual investors account for the majority of corporate bondholders does not mean individual investors are more interested in investing in bonds or have more access to the corporate bonds than institutional investors. Rather, we believe it is a lack of investment opportunities available to individual investors which has left investors with bonds (other than bank deposits) to invest to receive fixed income. Also, a lack of high-yield bond analysis among institutional investors, an absence of hedge funds, and regulators’ risk averse opinion on high-yield bonds all lead to limited corporate bond holding by institutional investors.  
Our subsequent research report(s) on the THB bond market will reflect on liquidity, valuation (including pricing &amp; benchmark), and benefits/concerns for international investors looking to diversify its bond portfolio and/or seeking to increase exposure in THB financial assets.
We note that a high-yield bond sector on an international scale comprises THB bonds with a rating of A+/A+(Tha)  with lower ratings on Thailand’s national scale (See Rating Agencies sector).  As a result, we aim to cover Thailand’s THB corporate bond market rated A+/A+(Tha) or lower on a national scale by TRIS Ratings and/or Fitch Ratings (Thailand) as well as unrated bonds issued through both public offering and private placements as long as we can obtain sufficient public material information to make recommendations. Our analysis on the rated bonds will be focused on our opinion on the existing local and international rating(s) and expected rating actions. Our analysis on unrated bonds will be, on the other hand, an attempt to suggest how the market should perceive the bonds’ implied credit ratings. In both cases, we aim to provide valuation to help investors make judgments whether they receive sufficient returns for the credit and liquidity risks they are taking on.

<p><strong>Yesterday analyst meeting came out with a neutral tone. We expect weak recovery in remaining quarters through 1H21, as development of vaccine rollout in many countries.</strong></p><div>• Revised down 2021-23E earnings given a slower recovery in all regions, particularly Europe due to renewed lockdowns amidst the second wave of COVID-19.</div><div></div><div>• The company announced an issue of warrant for ordinary shares 2 series, which not exceeding 341 million units including (1) MINT-W8 (179 million units) at a ratio of 29 existing shares for 1 warrant with a term of up to 2 years and exercise price of Bt28 per share and (2) MINT-W9 (162 million units) at a ratio of 32 existing shares for 1 warrant with a term of up to 3 years and exercise price of Bt31 per share.</div><div></div><div>• We expect 1Q21 earnings to improve slightly from the previous quarter on the back of continuous cost reduction and improvement performance of food business after partially lift the lockdown in Thailand.</div><div>
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</div><p><strong>We maintain our HOLD rating with new target price at Bt32.0 (-2% from previous target price) based DCF method (WACC of 6% and terminal growth of 2%), implying 45.9xPE’22 due to limited upside and its weak earnings momentum in the next twelve- months.</strong></p>

Yesterday analyst meeting came out with a neutral tone. We expect weak recovery in remaining quarters through 1H21, as development of vaccine rollout in many countries.• Revised down 2021-23E earnings given a slower recovery in all regions, particularly Europe due to renewed lockdowns amidst the second wave of COVID-19.• The company announced an issue of warrant for ordinary shares 2 series, which not exceeding 341 million units including (1) MINT-W8 (179 million units) at a ratio of 29 existing shares for 1 warrant with a term of up to 2 years and exercise price of Bt28 per share and (2) MINT-W9 (162 million units) at a ratio of 32 existing shares for 1 warrant with a term of up to 3 years and exercise price of Bt31 per share.• We expect 1Q21 earnings to improve slightly from the previous quarter on the back of continuous cost reduction and improvement performance of food business after partially lift the lockdown in Thailand.
 
We maintain our HOLD rating with new target price at Bt32.0 (-2% from previous target price) based DCF method (WACC of 6% and terminal growth of 2%), implying 45.9xPE’22 due to limited upside and its weak earnings momentum in the next twelve- months.

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 Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p><a href="https://www.smartkarma.com/entities/thai-union-group-pcl" target="_blank" data-smartkarma-citation="entities:161:1" rel="noopener">Thai Union Group (TU TB)</a> is a Thai listed global food company and is a leading producer of tuna and seafood. The company saw a recent sell-off due to a COVID-19 outbreak at the Mahachai seafood market in Samut Sakhon province, which seems unjustified since it has little exposure. </p>
<p>The company has confirmed that its own seafood facilities in Thailand are enclosed and it has seen little impact from this latest outbreak. </p>
<p>As of 6th January, <a href="https://www.smartkarma.com/entities/thai-union-group-pcl" target="_blank" data-smartkarma-citation="entities:161:1" rel="noopener">Thai Union Group (TU TB)</a> had tested 85% of employees, or 23,630 workers, in Samut Sakhon province, where a cluster of cases emerged at the market late last year.</p>
<p>The company has not yet shut any plants in the Samut Sakhon Province but a two-week shutdown could impact about 2% of total revenue.</p>
<p><a href="https://www.smartkarma.com/entities/thai-union-group-pcl" target="_blank" data-smartkarma-citation="entities:161:1" rel="noopener">Thai Union Group (TU TB)</a> booked record earnings of Bt2.06bn in 9M2020 net profit growth of +50% YoY and +20% QoQ on the back of organic sales growth of +9.3% on volume growth of +5.2%, despite COVID-19.</p>
<p>It also saw significant loss reductions at Red Lobster which was acquired in 2019 and has successfully completed a restructuring of the company's shareholding structure bringing in Seafood Alliance as the second-largest shareholder. </p>
<p><a href="https://www.smartkarma.com/entities/thai-union-group-pcl" target="_blank" data-smartkarma-citation="entities:161:1" rel="noopener">Thai Union Group (TU TB)</a>'s valuations look relatively attractive from a historic perspective, with the company trading on 11.6x FY21E and 10.7x FY22E PER, with a flat EPS for FY21E. We continue to take a positive view on the company, especially given its global credentials.</p>

Thai Union Group (TU TB) is a Thai listed global food company and is a leading producer of tuna and seafood. The company saw a recent sell-off due to a COVID-19 outbreak at the Mahachai seafood market in Samut Sakhon province, which seems unjustified since it has little exposure. 
The company has confirmed that its own seafood facilities in Thailand are enclosed and it has seen little impact from this latest outbreak. 
As of 6th January, Thai Union Group (TU TB) had tested 85% of employees, or 23,630 workers, in Samut Sakhon province, where a cluster of cases emerged at the market late last year.
The company has not yet shut any plants in the Samut Sakhon Province but a two-week shutdown could impact about 2% of total revenue.
Thai Union Group (TU TB) booked record earnings of Bt2.06bn in 9M2020 net profit growth of +50% YoY and +20% QoQ on the back of organic sales growth of +9.3% on volume growth of +5.2%, despite COVID-19.
It also saw significant loss reductions at Red Lobster which was acquired in 2019 and has successfully completed a restructuring of the company's shareholding structure bringing in Seafood Alliance as the second-largest shareholder. 
Thai Union Group (TU TB)'s valuations look relatively attractive from a historic perspective, with the company trading on 11.6x FY21E and 10.7x FY22E PER, with a flat EPS for FY21E. We continue to take a positive view on the company, especially given its global credentials.

Thai Union Group (TU TB) - Enter the Chicken of the Sea

Thailand

Minor International PCL is a global company focused on three primary businesses including restaurants, hotels and lifestyle brands distribution.

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Minor International (MINT TB)

MINT: Europe Performance Back on Growth Track in 2H21

Yesterday analyst meeting came out with a positive tone. We expect strong recovery in 2H21, given Europe vaccination progress and improvement...

Pi Securities PCL, Thailand

Thailand: The Baht Bond Bandwagon

We initiate our coverage of Thailand's THB corporate bond market with market composition, participants, and rating agencies.

Bondcritic

MINT: Expect Continuing Loss in 1Q21

Yesterday analyst meeting came out with a neutral tone. We expect weak recovery in remaining quarters through 1H21, as development of vaccine...

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 Union Group (TU TB) - Enter the Chicken of the Sea

Thai Union is truly a global food provider, with its leading position in both canned tuna and chilled and frozen seafoods. The impact of the latest...

Angus Mackintosh

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