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

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

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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. 

2. Post-Covid 19 – Economic Reality Bites

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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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