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Thailand

Brief Thailand: DELTA: Prime Beneficiary of Transition to Electric Vehicles and more

By | Daily Briefs, Thailand

In this briefing:

  1. DELTA: Prime Beneficiary of Transition to Electric Vehicles
  2. SET50 Index Review – Delta to Sell
  3. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

1. DELTA: Prime Beneficiary of Transition to Electric Vehicles

D7

We initiate coverage of DELTA with a HOLD rating and a 2021E target price of Bt56.50, derived from 17.5x PE’21E, which is its 5-year trading average.

The story:

•Global player in IT infrastructure and EV components
•Growing power supply and data center markets
•Beneficiary of automobile industry’s transition to electric vehicles
•Will recover from the impact of Covid-19 in 2H20
•Challenges from the lingering trade war and baht appreciation

Risks: 

•Foreign exchange rate fluctuation

Background:

Delta Electronics (Thailand) Public Company Limited is a subsidiary of Delta Electronics, Inc. Delta Thailand is a manufacturer and exporter of power supplies and electronic equipment and parts. The company is one of the world›s leading producers of power supplies and electronic components, including cooling fans, EMI filters, and solenoids. At present, the company has 2 main plants in Thailand and two each in India (Rudrapur and Krishnagiri), Slovakia (Dubnica and Váhom and Liptovsky Hradok).

2. SET50 Index Review – Delta to Sell

Image 37744049641592254358311

Late last evening, the Stock Exchange of Thailand (SET) announced the results of the semi-annual review of the SET50 index. The changes will be effective from 1 July 2020 and passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020.

There are 2 additions Banpu Power PCL (BPP TB) and TTW Pcl (TTW TB), and 2 deletions Banpu Public (BANPU TB) and Delta Electronics Thai (DELTA TB).

We estimate more than 4 days of ADV to buy on TTW Pcl (TTW TB) and more than 4 days of ADV to sell on Delta Electronics Thai (DELTA TB).

Banpu Power PCL (BPP TB) was deleted from the SET50 index in February to make way for Central Retail (CRC TB). The stock has notched up a huge gain since then and re-enters the index.

3. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

You are currently reading Executive Summaries of Smartkarma Insights.

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Brief Thailand: The Week that Was in [email protected] – PAP Retains Power, Rising Sea Ltd, and Cratering Credit Risk and more

By | Daily Briefs, Thailand

In this briefing:

  1. The Week that Was in [email protected] – PAP Retains Power, Rising Sea Ltd, and Cratering Credit Risk
  2. PSL: Another Opportunity at the Bottom of Dry Bulk Cycle
  3. Double Bubble, Double Trouble?
  4. Revisiting Mitr Phol Group: Erawan and Banpu
  5. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

1. The Week that Was in [email protected] – PAP Retains Power, Rising Sea Ltd, and Cratering Credit Risk

Image?1594620051

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In PAP Retains Power, but Faces the Largest Opposition Contingent Since Independence, Cross ASEAN Cheif Economist Prasenjit K. Basu comments on last week’s election in Singapore. 

In Singapore’s Twin Surpluses: How Much Is Too Much?, CrossASEAN’s Cheif Economist Prasenjit K. Basu comments on Singapore’s standout current account and fiscal surpluses. 

Equity Bottom-Up Insights

In Sea Ltd (SE US) – Gaming Its Way to the Top, Crossasean insight Provider Angus Mackintosh zeros in on South East Asia’s leading e-commerce and gaming player as the company continues to hit new highs. 

In BCA – Most ROA to Claw Back, banking specialist Daniel Tabbush revisits Indonesia’s leading private bank and assesses the impact of COVID-19 so far with a focus on Bank Central Asia (BBCA IJ) versus its local and regional peers. 

In Company Visits: KTC, Taokaenoi (Treading Water),Athaporn Arayasantiparb, CFA provides feedback from recent company visits to Krungthai Card (KTC TB) and Taokaenoi Food & Marketing (TKN TB).

In EPG: One of the Most Solid Polymer Convertor in the Downstream Sector, our friends at Country Group zero in on Eastern Polymer Group (EPG TB).

In DOHOME: Fastest Growing Home-Improvement Player in Thailand,Country Group initiate coverage on Dohome PCL (DOHOME TB) with a HOLD rating based on a target price of Bt12.5. 

In RBF: Recent Jump in Share Price Leads to OvervaluationDr Andrew Stotz, CFA initiates coverage on RBF with a SELL recommendation based on a target price of Bt8.70, implying a downside of 13% from the current price. 

In Valuation Is Approaching an Expensive Zone our friends at Country Group downgrade Com7 PCL (COM7 TB) to a HOLD rating after rolling over 2021E target price to Bt29.30.

In TFG: Weak 2Q20E but Strong Outlook in Medium to Long Term,Country Group maintain a BUY rating on Thai Foods Group Public Company (TFG TB) with a new 2021E target price at Bt5.95.

Sector and Thematic Insights

In this thematic insight, Banks – Credit Risk, Cratering, banking specialist Daniel Tabbush zeros in on credit risk for banks across the region. 

2. PSL: Another Opportunity at the Bottom of Dry Bulk Cycle

Psl%201.1

We initiate coverage of PSL with a BUY rating, based on a target price of Bt7.10, which is derived from 1.0xPBV’21E, its 10-year average.

The Story:

• Solid position in bloodied industry
• Expected TC rate recovery in 2021
• Effective cost management is its core competency

Risks:

• Charter rate fluctuation
• Exchange rate fluctuation
• Outcome of arbitration with Chinese shipyard

3. Double Bubble, Double Trouble?

Image 28694035391594500095935

A review of U.S. and global markets reveals that market leadership has narrowed to NASDAQ and Chinese stocks. If this is the start of a new bull, or a continuation of the old bull, can it rest on the narrow leadership of a handful of NASDAQ stocks and the Chinese market?

Is this just a double bubble, and does that imply double trouble ahead?

We are not sure. We are torn between Bob Farrell’s Rule No. 4:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

And Rule No. 7.

Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Investors need to be aware of the tension between Rule No. 4, which raises the possibility of a stock bubble, and the risks posed by the narrow leadership warned by Rule No. 7. Tail-risk is high in both directions. In this environment, it is worthwhile to return to basics and re-visit investment objectives and risk tolerances in order to balance risk and reward. There are no perfect answers and each will be different.

Regardless of what direction the market takes, investors can count on a climate of high volatility in the near future.

4. Revisiting Mitr Phol Group: Erawan and Banpu

Breakeven%20hotel

We visited three companies in the Mitr Phol Group, namely hotel chain Erawan, the  and Thailand’s largest coal producer Banpu. This is a quick run-down.

  • Erawan reported net loss of Bt77m in Q1’20 and EBITDA contraction of 63% to Bt224m. The company closed its Thai hotels since April and Manila-based ones since May 19.
  • Cost cutting: The company plans to cut lease payments by 20-30% and also postpone debt repayments to the banks. They also plan to cut investments by 50%.
  • Banpu Power reported healthy EBITDA of Bt1.77bn (up 10% YoY) on the back of Bt1.84bn  (+5% YoY) buoyed by stronger demand for power and steam in China needed to operate hospitals. However, its one-time core power plant BLCP contributed a loss of Bt70m due to translation losses. The hidden crown jewel is Banpu NEXT, the renewable business, which just needs time to appreciated.
  • The parent company Banpu reported an EBITDA of US$134m, down 42% YoY, and earnings of Bt55m. The coal business, just like other energy segments (oil, gas), performed poorly, but Banpu made the most of it by negotiating down the price of Barnett in the United States, a deal that will be concluded towards the end of this year.

5. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

Image 71063129331594361508270

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:

  • 6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
  • Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
  • South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
  • The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.

Previous related insights:

5G for the Next Big Turn of a New Decade 

Will 2020 See Successful Deployment of 5G? 

Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 

5G Delay and Disappointment – Will Murata Suffer? 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Thailand: SET50 Index Review – Delta to Sell and more

By | Daily Briefs, Thailand

In this briefing:

  1. SET50 Index Review – Delta to Sell
  2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

1. SET50 Index Review – Delta to Sell

Image 37744049641592254358311

Late last evening, the Stock Exchange of Thailand (SET) announced the results of the semi-annual review of the SET50 index. The changes will be effective from 1 July 2020 and passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020.

There are 2 additions Banpu Power PCL (BPP TB) and TTW Pcl (TTW TB), and 2 deletions Banpu Public (BANPU TB) and Delta Electronics Thai (DELTA TB).

We estimate more than 4 days of ADV to buy on TTW Pcl (TTW TB) and more than 4 days of ADV to sell on Delta Electronics Thai (DELTA TB).

Banpu Power PCL (BPP TB) was deleted from the SET50 index in February to make way for Central Retail (CRC TB). The stock has notched up a huge gain since then and re-enters the index.

2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Thailand: SET50 Index Review – Delta to Sell and more

By | Daily Briefs, Thailand

In this briefing:

  1. SET50 Index Review – Delta to Sell
  2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp
  3. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

1. SET50 Index Review – Delta to Sell

Image 37744049641592254358311

Late last evening, the Stock Exchange of Thailand (SET) announced the results of the semi-annual review of the SET50 index. The changes will be effective from 1 July 2020 and passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020.

There are 2 additions Banpu Power PCL (BPP TB) and TTW Pcl (TTW TB), and 2 deletions Banpu Public (BANPU TB) and Delta Electronics Thai (DELTA TB).

We estimate more than 4 days of ADV to buy on TTW Pcl (TTW TB) and more than 4 days of ADV to sell on Delta Electronics Thai (DELTA TB).

Banpu Power PCL (BPP TB) was deleted from the SET50 index in February to make way for Central Retail (CRC TB). The stock has notched up a huge gain since then and re-enters the index.

2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

3. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

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The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Thailand: PSL: Another Opportunity at the Bottom of Dry Bulk Cycle and more

By | Daily Briefs, Thailand

In this briefing:

  1. PSL: Another Opportunity at the Bottom of Dry Bulk Cycle
  2. Double Bubble, Double Trouble?
  3. Revisiting Mitr Phol Group: Erawan and Banpu
  4. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment
  5. TFG: Weak 2Q20E but Strong Outlook in Medium to Long Term

1. PSL: Another Opportunity at the Bottom of Dry Bulk Cycle

Psl%201.91

We initiate coverage of PSL with a BUY rating, based on a target price of Bt7.10, which is derived from 1.0xPBV’21E, its 10-year average.

The Story:

• Solid position in bloodied industry
• Expected TC rate recovery in 2021
• Effective cost management is its core competency

Risks:

• Charter rate fluctuation
• Exchange rate fluctuation
• Outcome of arbitration with Chinese shipyard

2. Double Bubble, Double Trouble?

Image 40134023831594500095932

A review of U.S. and global markets reveals that market leadership has narrowed to NASDAQ and Chinese stocks. If this is the start of a new bull, or a continuation of the old bull, can it rest on the narrow leadership of a handful of NASDAQ stocks and the Chinese market?

Is this just a double bubble, and does that imply double trouble ahead?

We are not sure. We are torn between Bob Farrell’s Rule No. 4:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

And Rule No. 7.

Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Investors need to be aware of the tension between Rule No. 4, which raises the possibility of a stock bubble, and the risks posed by the narrow leadership warned by Rule No. 7. Tail-risk is high in both directions. In this environment, it is worthwhile to return to basics and re-visit investment objectives and risk tolerances in order to balance risk and reward. There are no perfect answers and each will be different.

Regardless of what direction the market takes, investors can count on a climate of high volatility in the near future.

3. Revisiting Mitr Phol Group: Erawan and Banpu

Breakeven%20hotel

We visited three companies in the Mitr Phol Group, namely hotel chain Erawan, the  and Thailand’s largest coal producer Banpu. This is a quick run-down.

  • Erawan reported net loss of Bt77m in Q1’20 and EBITDA contraction of 63% to Bt224m. The company closed its Thai hotels since April and Manila-based ones since May 19.
  • Cost cutting: The company plans to cut lease payments by 20-30% and also postpone debt repayments to the banks. They also plan to cut investments by 50%.
  • Banpu Power reported healthy EBITDA of Bt1.77bn (up 10% YoY) on the back of Bt1.84bn  (+5% YoY) buoyed by stronger demand for power and steam in China needed to operate hospitals. However, its one-time core power plant BLCP contributed a loss of Bt70m due to translation losses. The hidden crown jewel is Banpu NEXT, the renewable business, which just needs time to appreciated.
  • The parent company Banpu reported an EBITDA of US$134m, down 42% YoY, and earnings of Bt55m. The coal business, just like other energy segments (oil, gas), performed poorly, but Banpu made the most of it by negotiating down the price of Barnett in the United States, a deal that will be concluded towards the end of this year.

4. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

Image 71063129331594361508270

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:

  • 6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
  • Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
  • South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
  • The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.

Previous related insights:

5G for the Next Big Turn of a New Decade 

Will 2020 See Successful Deployment of 5G? 

Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 

5G Delay and Disappointment – Will Murata Suffer? 

5. TFG: Weak 2Q20E but Strong Outlook in Medium to Long Term

Picture1

We maintain BUY rating on TFG with a new 2021E target price at Bt5.95, from Bt4.70, derived from 17.2xPE’21E, which is -0.5SD of its 3-years trading average. We attended analyst meeting yesterday and came up with key information as followed;

• TFG performance in 2Q20E was affected by Covid-19.
• We estimate TFG net profit in 2Q20E at Bt236m (-55%YoY, -64%QoQ). While, excluding FX losses, the recurring profit should be Bt386m (-21%YoY, -5%QoQ).
• The adversity in 2Q20E will fully recover from 3Q20E onwards.
• The company’s selling volume and price in 2H20E-2021 will be supported by promising export outlook
• The capacity expansion plan is intact with CAPEX budget of Bt2.5-3.0bn/year.

We think the stock price retreat on the concern over 2Q20E performance will be an investment opportunity for the livestock industry up-cycle.

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Brief Thailand: The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp and more

By | Daily Briefs, Thailand

In this briefing:

  1. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp
  2. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

1. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

2. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

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Brief Thailand: Double Bubble, Double Trouble? and more

By | Daily Briefs, Thailand

In this briefing:

  1. Double Bubble, Double Trouble?
  2. Revisiting Mitr Phol Group: Erawan and Banpu
  3. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment
  4. TFG: Weak 2Q20E but Strong Outlook in Medium to Long Term
  5. Valuation Is Approaching an Expensive Zone

1. Double Bubble, Double Trouble?

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A review of U.S. and global markets reveals that market leadership has narrowed to NASDAQ and Chinese stocks. If this is the start of a new bull, or a continuation of the old bull, can it rest on the narrow leadership of a handful of NASDAQ stocks and the Chinese market?

Is this just a double bubble, and does that imply double trouble ahead?

We are not sure. We are torn between Bob Farrell’s Rule No. 4:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

And Rule No. 7.

Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Investors need to be aware of the tension between Rule No. 4, which raises the possibility of a stock bubble, and the risks posed by the narrow leadership warned by Rule No. 7. Tail-risk is high in both directions. In this environment, it is worthwhile to return to basics and re-visit investment objectives and risk tolerances in order to balance risk and reward. There are no perfect answers and each will be different.

Regardless of what direction the market takes, investors can count on a climate of high volatility in the near future.

2. Revisiting Mitr Phol Group: Erawan and Banpu

Breakeven%20hotel

We visited three companies in the Mitr Phol Group, namely hotel chain Erawan, the  and Thailand’s largest coal producer Banpu. This is a quick run-down.

  • Erawan reported net loss of Bt77m in Q1’20 and EBITDA contraction of 63% to Bt224m. The company closed its Thai hotels since April and Manila-based ones since May 19.
  • Cost cutting: The company plans to cut lease payments by 20-30% and also postpone debt repayments to the banks. They also plan to cut investments by 50%.
  • Banpu Power reported healthy EBITDA of Bt1.77bn (up 10% YoY) on the back of Bt1.84bn  (+5% YoY) buoyed by stronger demand for power and steam in China needed to operate hospitals. However, its one-time core power plant BLCP contributed a loss of Bt70m due to translation losses. The hidden crown jewel is Banpu NEXT, the renewable business, which just needs time to appreciated.
  • The parent company Banpu reported an EBITDA of US$134m, down 42% YoY, and earnings of Bt55m. The coal business, just like other energy segments (oil, gas), performed poorly, but Banpu made the most of it by negotiating down the price of Barnett in the United States, a deal that will be concluded towards the end of this year.

3. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

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In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:

  • 6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
  • Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
  • South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
  • The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.

Previous related insights:

5G for the Next Big Turn of a New Decade 

Will 2020 See Successful Deployment of 5G? 

Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 

5G Delay and Disappointment – Will Murata Suffer? 

4. TFG: Weak 2Q20E but Strong Outlook in Medium to Long Term

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We maintain BUY rating on TFG with a new 2021E target price at Bt5.95, from Bt4.70, derived from 17.2xPE’21E, which is -0.5SD of its 3-years trading average. We attended analyst meeting yesterday and came up with key information as followed;

• TFG performance in 2Q20E was affected by Covid-19.
• We estimate TFG net profit in 2Q20E at Bt236m (-55%YoY, -64%QoQ). While, excluding FX losses, the recurring profit should be Bt386m (-21%YoY, -5%QoQ).
• The adversity in 2Q20E will fully recover from 3Q20E onwards.
• The company’s selling volume and price in 2H20E-2021 will be supported by promising export outlook
• The capacity expansion plan is intact with CAPEX budget of Bt2.5-3.0bn/year.

We think the stock price retreat on the concern over 2Q20E performance will be an investment opportunity for the livestock industry up-cycle.

5. Valuation Is Approaching an Expensive Zone

Com7%20update%202.5

We downgrade COM7 with HOLD rating after rolled over 2021E target price to Bt29.30 (Previous TP: Bt24.60) derived from 25.4xPE’21E, Thai consumer discretionary sector. The stock price has rallied 109% since our latest call on 1st April. This mostly reflects quick earnings recovery in 2H20 after the lockdown period in 2Q20 and benefit from huge lot purchase of electronic devices that related to Work-from-Home procedures.

• Accessories segment help offset sluggish growth in phone sales
• Domestic IT Spending still in good shape

We still like COM7 for its leading position in consumer IT market with promising branch expansion plan (955 stores by 2020) while the company will benefit from 5G network implementation in late 2020. Any near-term market price corrections will create opportunity to accumulate this value stock.

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Brief Thailand: Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare and more

By | Daily Briefs, Thailand

In this briefing:

  1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

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Brief Thailand: Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare and more

By | Daily Briefs, Thailand

In this briefing:

  1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare
  2. Post-Covid 19 – Economic Reality Bites

1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

2. Post-Covid 19 – Economic Reality Bites

Capture

A severe global recession is baked in the cake is the realisation steadily dawning on market commentators and institutions. Corporate profits have collapsed. Debt levels are rising rapidly. Both are ingredients for investment led economic downturn. So far markets buoyed by cheap liquidity markets have chosen to ignore economic reality but that might be changing.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Thailand: Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare and more

By | Daily Briefs, Thailand

In this briefing:

  1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare
  2. Post-Covid 19 – Economic Reality Bites
  3. SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand

1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

2. Post-Covid 19 – Economic Reality Bites

Capture

A severe global recession is baked in the cake is the realisation steadily dawning on market commentators and institutions. Corporate profits have collapsed. Debt levels are rising rapidly. Both are ingredients for investment led economic downturn. So far markets buoyed by cheap liquidity markets have chosen to ignore economic reality but that might be changing.

3. SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand

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We upgrade our recommendation from HOLD to BUY and roll over our target price in 2021E to Bt9.58 (from Bt5.24 in previous target), derived from 32xPE’21E, which is one-year average trading. We believe share price which dropped 25% from its January peak (Pre-COVID19 pandemic) already priced in investor’s concern over sharp decline in its 2020 earnings. However, this should provide an opportunity to accumulate share for earnings recovery next year and beyond.

• Thailand’s most comprehensive spa chain
• Chinese travelers positive outbound travel sentiment return to Thailand
• Measures of government to stimulate tourism promotion
• The worst impact on 2Q20E performance

We maintain our positive view toward its long-term outlook on the back of (1) strong business position (2) continuing branches expansion to 77 by 2021E up from 64 branches in 1Q20 (3) Chinese travelers positive outbound travel sentiment return to Thailand.

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