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>We downgrade our recommendation to HOLD rating, from BUY, with new target price of Bt445.00, -19% from Bt553.00 previously, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt334/share, derived from 10.6x PE, which is -1 SD of SCC’s 5 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation. We maintained valuation in Packaging part but de-rated valuation in Petrochemical and CBM part given the soften petrochemical outlook.</strong></p><div>• We expect SCC to report 2Q21E net profit of Bt14bn (+51%YoY, -5%QoQ). While, the YoY increase came from Packaging business expansion and better petrochemical price, the QoQ decrease was mainly due to lower margin in petrochemical business.</div><div></div><div>• We expect soften outlook for 2H21E, weighted down by petrochemical business, which selling price and spread of key products have contracted since the late of 2Q21. Currently, HDPE spread is about US$466/ton, down from US$585-588/ton in 1Q21-2Q21. PP spread is about US$579/ton, down from US$730-808/ton in 1Q21-2Q21. The squeeze came from both lower selling price due to more supply in the market, and higher cost, following the oil price spike.</div>

We downgrade our recommendation to HOLD rating, from BUY, with new target price of Bt445.00, -19% from Bt553.00 previously, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt334/share, derived from 10.6x PE, which is -1 SD of SCC’s 5 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation. We maintained valuation in Packaging part but de-rated valuation in Petrochemical and CBM part given the soften petrochemical outlook.• We expect SCC to report 2Q21E net profit of Bt14bn (+51%YoY, -5%QoQ). While, the YoY increase came from Packaging business expansion and better petrochemical price, the QoQ decrease was mainly due to lower margin in petrochemical business.• We expect soften outlook for 2H21E, weighted down by petrochemical business, which selling price and spread of key products have contracted since the late of 2Q21. Currently, HDPE spread is about US$466/ton, down from US$585-588/ton in 1Q21-2Q21. PP spread is about US$579/ton, down from US$730-808/ton in 1Q21-2Q21. The squeeze came from both lower selling price due to more supply in the market, and higher cost, following the oil price spike.

SCC : Expected Strong 2Q21E but Would Lose Momentum in 3Q21E

<p><strong>We maintain BUY rating with new 2022E target price of Bt553.00, from Bt462.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt442/share, derived from 14.0x PE, which is +0.5 SD of SCC’s 7 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation.</strong></p><div>• SCC delivered impressive performance in 1Q21, driven by all business units.</div><div></div><div>• The solid earnings should be intact in 2Q21.</div><div></div><div>• Management disclosed that SCC is in the process of exploring the feasibility of Chemicals business restructuring, which includes the possibility of SCG Chemicals’ IPO.</div><div>
<br>
</div><p><strong>The chemical business IPO should be a re-rating catalyst for SCC, given it is the largest business in the group. Meanwhile, SCC has proven track record in SCGP spin off.</strong></p>

We maintain BUY rating with new 2022E target price of Bt553.00, from Bt462.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt442/share, derived from 14.0x PE, which is +0.5 SD of SCC’s 7 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation.• SCC delivered impressive performance in 1Q21, driven by all business units.• The solid earnings should be intact in 2Q21.• Management disclosed that SCC is in the process of exploring the feasibility of Chemicals business restructuring, which includes the possibility of SCG Chemicals’ IPO.
 
The chemical business IPO should be a re-rating catalyst for SCC, given it is the largest business in the group. Meanwhile, SCC has proven track record in SCGP spin off.

SCC : On the Way to Unlock Chemical Business’s Value

<p><strong>We upgrade our recommendation to BUY rating, from HOLD, with new 2021E target price of Bt462.00, from Bt359.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt371/share, derived from 13.0x PE, which is SCC’s 7 years trading average, and, ii) Packaging business at Bt91/share, derived from 15% conglomerate discounted to 21.3xPE, which is equivalent to 1.0x PEG.</strong></p><div>• We expected SCC to report 1Q21 net profit at Bt12.1bn (+74%YoY, +51%QoQ), driven by petrochemical business.</div><div></div><div>• We revised up our 2021-23E net profit forecasts by 21%, 3%, and 2%, respectively, mainly reflected an increase in petrochemical spread assumption.</div><div></div><div>• Last week, HDPE spread was at US$748/ton (+27% from 1Q21) and PP spread was at US$906/ton (+12% from 1Q21).</div><div>
<br>
</div><p><strong>SCC is still a laggard to i) SCGP, its subsidiary whose value was unlocked since the IPO in 4Q20, ii) PTTGC, its petrochemical peer which performed strongly upon solid spread, and, iii) SCCC, its cement peer, whose stock recovered from effective cost control.</strong></p>

We upgrade our recommendation to BUY rating, from HOLD, with new 2021E target price of Bt462.00, from Bt359.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt371/share, derived from 13.0x PE, which is SCC’s 7 years trading average, and, ii) Packaging business at Bt91/share, derived from 15% conglomerate discounted to 21.3xPE, which is equivalent to 1.0x PEG.• We expected SCC to report 1Q21 net profit at Bt12.1bn (+74%YoY, +51%QoQ), driven by petrochemical business.• We revised up our 2021-23E net profit forecasts by 21%, 3%, and 2%, respectively, mainly reflected an increase in petrochemical spread assumption.• Last week, HDPE spread was at US$748/ton (+27% from 1Q21) and PP spread was at US$906/ton (+12% from 1Q21).
 
SCC is still a laggard to i) SCGP, its subsidiary whose value was unlocked since the IPO in 4Q20, ii) PTTGC, its petrochemical peer which performed strongly upon solid spread, and, iii) SCCC, its cement peer, whose stock recovered from effective cost control.

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

Indocement Tunggal Prakarsa / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" rel="noopener"><span data-preserver-spaces="true">Indocement Tunggal Prakarsa (INTP IJ)</span></a><span data-preserver-spaces="true"> released results last week with an -11%  decrease in sales to IDR 14,184.3bn but only a -1.6% decrease in net profit to IDR1,803.3bn, with a number of cost reduction initiatives baring fruit in 2020 and we see these initiative continuing into 2021 on top of higher sales.</span></p><p><span data-preserver-spaces="true">The company saw resilient performance last year from its bag cement sales but bulk cement demand suffered as infrastructure projects stalled but we expect this situation to reverse this year.</span></p><p><span data-preserver-spaces="true">The cost of revenues decreased last year due to lower volumes and continuous savings on fuel and power with lower coal prices but with greater use of LCV coal, alternative fuels, and other operational cost savings, plus the ongoing digitalization at the company. </span></p><p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> will continue to push these cost initiatives in 2021, with the potential to further increase the use of LCV coal and alternative fuels.</p><p>The company has seen a slow start to the year due to heavy rains but we should expect a strong rebound from April onwards as projects get underway.</p><p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> continues to improve its sustainability credentials with lower emissions and new environmentally friendly products. </p><p><a href="https://www.smartkarma.com/entities/indocement-tunggal-prakarsa" target="_blank" data-smartkarma-citation="entities:4040:1" rel="noopener">Indocement Tunggal Prakarsa (INTP IJ)</a> trades on 13.2x FY21E EV/EBITDA and 12.0x FY22E EV/EBITDA versus its 5-year average of 14.4x forward EV/EBITDA, making the company look relatively attractive from a valuation standpoint.</p>

Indocement Tunggal Prakarsa (INTP IJ) released results last week with an -11%  decrease in sales to IDR 14,184.3bn but only a -1.6% decrease in net profit to IDR1,803.3bn, with a number of cost reduction initiatives baring fruit in 2020 and we see these initiative continuing into 2021 on top of higher sales.The company saw resilient performance last year from its bag cement sales but bulk cement demand suffered as infrastructure projects stalled but we expect this situation to reverse this year.The cost of revenues decreased last year due to lower volumes and continuous savings on fuel and power with lower coal prices but with greater use of LCV coal, alternative fuels, and other operational cost savings, plus the ongoing digitalization at the company. Indocement Tunggal Prakarsa (INTP IJ) will continue to push these cost initiatives in 2021, with the potential to further increase the use of LCV coal and alternative fuels.The company has seen a slow start to the year due to heavy rains but we should expect a strong rebound from April onwards as projects get underway.Indocement Tunggal Prakarsa (INTP IJ) continues to improve its sustainability credentials with lower emissions and new environmentally friendly products. Indocement Tunggal Prakarsa (INTP IJ) trades on 13.2x FY21E EV/EBITDA and 12.0x FY22E EV/EBITDA versus its 5-year average of 14.4x forward EV/EBITDA, making the company look relatively attractive from a valuation standpoint.

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a>, SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.</p><p>The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.</p><p>The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.</p><p>Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.</p><p>In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.</p>

The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the Stock Exchange of Thailand SET 50 Index (SET50 INDEX), SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

Thailand

The Siam Cement Public Company Limited is a diversified industrial company. The Company's operations include cement manufacturing, petrochemicals manufacturing, paper manufacturing, building product manufacturing, and distribution.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Siam Cement (SCC TB)

SCC : Expected Strong 2Q21E but Would Lose Momentum in 3Q21E

We downgrade our recommendation to HOLD rating, from BUY, with new target price of Bt445.00, -19% from Bt553.00 previously, valued from Sum of the...

Pi Securities PCL, Thailand

SCC : On the Way to Unlock Chemical Business’s Value

We maintain BUY rating with new 2022E target price of Bt553.00, from Bt462.00, valued from Sum of the Parts valuation, divided to i) Petrochemical...

Pi Securities PCL, Thailand

SCC : The Time Has Come

We upgrade our recommendation to BUY rating, from HOLD, with new 2021E target price of Bt462.00, from Bt359.00, valued from Sum of the Parts...

Pi Securities PCL, Thailand

Indocement Tunggal Prakarsa (INTP IJ) - Bunkering Down for a Better Year

Indocement is a high-quality core holding for exposure to the recovery in cement demand this year and next, with lower costs and digitalization...

Angus Mackintosh

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

The SET has commenced a market consultation on the proposed changes to make its indices free float market cap weighted. We look at the impact on...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)