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

Northeast Rubber Public Company Limited / Equity Bottom-Up

<ul><li>We maintain a Buy call (FV: Bt6.51). Since we recommended taking profit on rubber stocks in mid-March when rubber prices peaked, NER's share price has dropped by around 14%, reflecting very limited downside technical risk.</li><li>The 1Q24 earnings were as strong as expected, with further momentum likely in 2Q24E when average selling prices will fully reflect rising rubber prices.</li><li>We maintain our positive view on the rubber price trend as well as the earnings recovery outlook in 2024E.</li></ul>

We maintain a Buy call (FV: Bt6.51). Since we recommended taking profit on rubber stocks in mid-March when rubber prices peaked, NER's share price has dropped by around 14%, reflecting very limited downside technical risk.The 1Q24 earnings were as strong as expected, with further momentum likely in 2Q24E when average selling prices will fully reflect rising rubber prices.We maintain our positive view on the rubber price trend as well as the earnings recovery outlook in 2024E.

North East Rubber - In-Line 1Q24 Core Profit, with Stronger Momentum in 2Q24E

<ul><li>Since we recommended taking profit on rubber stocks in mid-March when rubber prices peaked, NER's share price has dropped by around 14%, reflecting very limited downside technical risk.</li><li>Therefore, we switch our rating to a Buy (from Outperform), amid the unchanged earnings estimates and FV (Bt6.51).</li><li>Investors may gradually accumulate the stock after the end of the rubber tapping season (in February-May) and during the release of the 1Q24E earnings results (on May 9) to further capture the growing momentum of the earnings performance in 2Q24E, when average selling prices will fully reflect rising rubber prices. </li></ul>

Since we recommended taking profit on rubber stocks in mid-March when rubber prices peaked, NER's share price has dropped by around 14%, reflecting very limited downside technical risk.Therefore, we switch our rating to a Buy (from Outperform), amid the unchanged earnings estimates and FV (Bt6.51).Investors may gradually accumulate the stock after the end of the rubber tapping season (in February-May) and during the release of the 1Q24E earnings results (on May 9) to further capture the growing momentum of the earnings performance in 2Q24E, when average selling prices will fully reflect rising rubber prices. 

North East Rubber - Solid 1Q24E Core Profit, with Stronger Momentum in 2Q24E

Thematic (Sector/Industry)

<ul><li>Given the tighter rubber supply outlook, we remain bullish on the rubber price uptrend in 2024E, which should be an earnings catalyst for rubber stocks this year.</li><li>As for the stock under our coverage, i.e., NER (Outperform; FV at Bt6.52), its earnings are expected to grow by 36% YoY in 2024E.</li><li>It's worth noting that rubber prices exhibit a correlation with rubber stock prices of approximately 60-80%, factoring in the nature of the business and the varying revenue structures across products. </li></ul>

Given the tighter rubber supply outlook, we remain bullish on the rubber price uptrend in 2024E, which should be an earnings catalyst for rubber stocks this year.As for the stock under our coverage, i.e., NER (Outperform; FV at Bt6.52), its earnings are expected to grow by 36% YoY in 2024E.It's worth noting that rubber prices exhibit a correlation with rubber stock prices of approximately 60-80%, factoring in the nature of the business and the varying revenue structures across products. 

Rubber - Maintain Bullish View on Rubber Prices in 2024E

<ul><li>A possible global recession that would weigh on rubber prices and the GPM are the key reasons for our downward revision to NER’s 2023-25E earnings, which should show a contraction in 2023E before resuming their momentum in 2024-25E, driven by production capacity expansion.</li><li>The high-norm beta for NER reflects the cyclical nature of rubber prices and the business’s high sensitivity to the impact of the economic growth of Thailand’s key trading partners, as well as the pace of growth of related downstream industries, i.e., the tire industry and automotive/EV industries.</li><li>Hence, NER’s share price has underperformed on the SET downtrend.</li></ul>

A possible global recession that would weigh on rubber prices and the GPM are the key reasons for our downward revision to NER’s 2023-25E earnings, which should show a contraction in 2023E before resuming their momentum in 2024-25E, driven by production capacity expansion.The high-norm beta for NER reflects the cyclical nature of rubber prices and the business’s high sensitivity to the impact of the economic growth of Thailand’s key trading partners, as well as the pace of growth of related downstream industries, i.e., the tire industry and automotive/EV industries.Hence, NER’s share price has underperformed on the SET downtrend.

North East Rubber - Challenges Behind Downward Earnings Revision

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/halcyon-agri-corp-ltd" target="_blank" data-smartkarma-citation="entities:18191:1" rel="noopener">Halcyon Agri (HACL SP)</a>’s S$0.413 per share MGO from <a href="https://www.smartkarma.com/entities/china-hainan-rubber-industry-group" target="_blank" data-smartkarma-citation="entities:10551:1" rel="noopener">China Hainan Rubber Industry (601118 CH)</a> has met the 50%+ minimum acceptance condition.</li>
<li>The closing date is extended from 24 March to 10 April. The payment settlement is within seven business days of receipt of a valid acceptance.</li>
<li>The offeror currently represents 50.003% of outstanding shares. At the last close, the gross and annualised spread for a 10 April payment is 2.0% and 41.8%, respectively. </li>
</ul>



Halcyon Agri (HACL SP)’s S$0.413 per share MGO from China Hainan Rubber Industry (601118 CH) has met the 50%+ minimum acceptance condition.
The closing date is extended from 24 March to 10 April. The payment settlement is within seven business days of receipt of a valid acceptance.
The offeror currently represents 50.003% of outstanding shares. At the last close, the gross and annualised spread for a 10 April payment is 2.0% and 41.8%, respectively. 


Halcyon Agri (HACL SP): Hainan Rubber’s Offer Is Declared Unconditional

Thailand

Northeast Rubber Public Company Limited manufactures rubber products. The Company focuses on producing ribbed smoked sheets, soles, hoses, and rubber components. Northeast Rubber markets its products worldwide.

Northeast Rubber Public Company Limited (NER TB)

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Northeast Rubber Public Company Limited (NER TB)

North East Rubber - In-Line 1Q24 Core Profit, with Stronger Momentum in 2Q24E

The 1Q24 earnings were as strong as expected, with further momentum likely in 2Q24E when average selling prices will fully reflect rising rubber...

Krungthai XSpring

North East Rubber - Solid 1Q24E Core Profit, with Stronger Momentum in 2Q24E

Since we recommended taking profit on rubber stocks in mid-March when rubber prices peaked, NER's share price has dropped by around 14%, reflecting...

Krungthai XSpring

Rubber - Maintain Bullish View on Rubber Prices in 2024E

Given the tighter rubber supply outlook, we remain bullish on the rubber price uptrend in 2024E, which should be an earnings catalyst for rubber...

Krungthai XSpring

North East Rubber - Challenges Behind Downward Earnings Revision

A possible global recession that would weigh on rubber prices and the GPM are the key reasons for our downward revision to NER’s 2023-25E earnings

Krungthai XSpring

Halcyon Agri (HACL SP): Hainan Rubber’s Offer Is Declared Unconditional

The offer (S$0.413 per share) is unconditional and closes on 10 April. Payment is within seven business days of receipt of a valid acceptance. At...

Arun George

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52-week Range

Market Cap (USDm)

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