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>GLOBAL share price surged 38%YTD as we believe it has already priced in near-term positive factors. So, we reiterate our HOLD rating with a target price of Bt21.4 based on 35xPE’21E, close to the average of the Thailand home-improvement subsector.</strong></p><div>• We expect GLOBAL to report 2Q21 net profit of Bt734m (+45%YoY, -24%QoQ). The YoY growth will be supported by gross profit margin expansion from a higher revenue contribution of house brand products and increasing margin of steel products, while QoQ drop in earnings will be due to seasonal factor (high season quarter in Q1).</div><div></div><div>• In 2H21, we expect GLOBAL earnings to drop HoH caused by (1) low season quarter in Q3 (rainy season), (2) lower gross profit margin from steel products, and, (3) slowdown in construction activities impacted from the 3rd wave of COVID-19.</div><div></div><div>• Construction Materials Price Index (CMI) remain flat MoM while +10%YoY in June 2021 mainly driven by steel products which increased 44%YoY in June 2021.</div>

GLOBAL share price surged 38%YTD as we believe it has already priced in near-term positive factors. So, we reiterate our HOLD rating with a target price of Bt21.4 based on 35xPE’21E, close to the average of the Thailand home-improvement subsector.• We expect GLOBAL to report 2Q21 net profit of Bt734m (+45%YoY, -24%QoQ). The YoY growth will be supported by gross profit margin expansion from a higher revenue contribution of house brand products and increasing margin of steel products, while QoQ drop in earnings will be due to seasonal factor (high season quarter in Q1).• In 2H21, we expect GLOBAL earnings to drop HoH caused by (1) low season quarter in Q3 (rainy season), (2) lower gross profit margin from steel products, and, (3) slowdown in construction activities impacted from the 3rd wave of COVID-19.• Construction Materials Price Index (CMI) remain flat MoM while +10%YoY in June 2021 mainly driven by steel products which increased 44%YoY in June 2021.

GLOBAL: Expect Solid 2Q21 Earnings Has Already Priced In

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

<p><strong>GLOBAL’s 4Q20 net profit was at Bt378m (-36%YoY, -17%QoQ), the lowest level in the past twelve quarter. The company reports 2020 net profit of Bt2bn (-6%YoY), which is lower than our expectation and consensus.</strong></p><div>• YoY drop in 4Q20 earnings was primarily pressured by an increase in SG&amp;A expenses at 7.4%YoY from higher salary expenses of five new stores and renovation stores expenses. Meanwhile, revenue grew 2%YoY at Bt6.9bn.</div><div></div><div>• We expect 1Q21 earnings to recover 5%QoQ driven by sales growth and gross profit margin expansion from continuing demand recovery in construction materials (Construction Materials Price Index (CMI) grew 3.3%MoM and 3.7%YoY in Jan 2021 mainly driven by steel products which increased 15%YoY in Jan 2021).</div><p></p><p><strong>GLOBAL share price surged 21%YTD as we believe it has already priced in near-term positive factors. So, we maintain HOLD rating with a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the Thailand home-improvement subsector.</strong></p>

GLOBAL’s 4Q20 net profit was at Bt378m (-36%YoY, -17%QoQ), the lowest level in the past twelve quarter. The company reports 2020 net profit of Bt2bn (-6%YoY), which is lower than our expectation and consensus.• YoY drop in 4Q20 earnings was primarily pressured by an increase in SG&amp;A expenses at 7.4%YoY from higher salary expenses of five new stores and renovation stores expenses. Meanwhile, revenue grew 2%YoY at Bt6.9bn.• We expect 1Q21 earnings to recover 5%QoQ driven by sales growth and gross profit margin expansion from continuing demand recovery in construction materials (Construction Materials Price Index (CMI) grew 3.3%MoM and 3.7%YoY in Jan 2021 mainly driven by steel products which increased 15%YoY in Jan 2021).GLOBAL share price surged 21%YTD as we believe it has already priced in near-term positive factors. So, we maintain HOLD rating with a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the Thailand home-improvement subsector.

GLOBAL: 4Q20 Earnings Came Out Below Expectation

<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?

<p><strong>We initiate coverage of ILM with a BUY rating, based on a target price of Bt22.0, which is derived from 15xPE’21E, close to its average trading range since its IPO in 2019 and at a 40% discount to the Asia ex-japan Consumer Discretionary Sector.</strong></p>
<p><strong>The story:</strong></p>
<ul>
<li>Enjoys strong market position in Thailand</li>
<li>Margin expansion in the next two years</li>
<li>Younique brand will drive S-curve growth</li>
<li>Online platform has good growth potential</li>
</ul>
<div>
<br>
</div>
<p><strong>Risks:</strong></p>
<ul>
<li>Highly competitive industry</li>
<li>Foreign exchange rate fluctuation</li>
</ul>
<p><strong>Background:</strong> Index Living Mall Public Company Limited (ILM) engages in the retail and wholesale of furniture, electronic and home decorative products in Thailand with 31 stand-alone stores nationwide. The company operates in four segments: furniture retail, furniture manufacturing, area rentals, and others. The company is also involved in the import, export and distribution of furniture and home appliances; and building and warehouse rental activities, as well as in the franchise business. In addition, it operates rental and retail space services in Index Living Malls and community malls under The Walk, Little Walk, and Index Mall brands. </p>

We initiate coverage of ILM with a BUY rating, based on a target price of Bt22.0, which is derived from 15xPE’21E, close to its average trading range since its IPO in 2019 and at a 40% discount to the Asia ex-japan Consumer Discretionary Sector.
The story:

Enjoys strong market position in Thailand
Margin expansion in the next two years
Younique brand will drive S-curve growth
Online platform has good growth potential


 

Risks:

Highly competitive industry
Foreign exchange rate fluctuation

Background: Index Living Mall Public Company Limited (ILM) engages in the retail and wholesale of furniture, electronic and home decorative products in Thailand with 31 stand-alone stores nationwide. The company operates in four segments: furniture retail, furniture manufacturing, area rentals, and others. The company is also involved in the import, export and distribution of furniture and home appliances; and building and warehouse rental activities, as well as in the franchise business. In addition, it operates rental and retail space services in Index Living Malls and community malls under The Walk, Little Walk, and Index Mall brands. 

ILM: King of Home Furnishing Retailers in Thailand

Thailand

Siam Global House PCL is a retailer of home related products for construction, repair, decoration, and renovation. The Company sells construction materials, hand tools, furniture, and garden tools.

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Siam Global House (GLOBAL TB)

GLOBAL: Expect Solid 2Q21 Earnings Has Already Priced In

GLOBAL share price surged 38%YTD as we believe it has already priced in near-term positive factors. So, we reiterate our HOLD rating with a target...

Pi Securities PCL, Thailand

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

GLOBAL: 4Q20 Earnings Came Out Below Expectation

GLOBAL’s 4Q20 net profit was at Bt378m (-36%YoY, -17%QoQ), the lowest level in the past twelve quarter. The company reports 2020 net profit of...

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

ILM: King of Home Furnishing Retailers in Thailand

We initiate coverage of ILM with a BUY rating, based on a target price of Bt22.0, which is derived from 15xPE’21E, close to its average trading...

Pi Securities PCL, Thailand

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