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Market Talk Investment Strategy Research Division

English research reports are a rough translation of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-English research reports are a rough translation of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research team. Given that this is a rough-and-ready translation, Asia Plus Securities Company cannot be held responsible for translation inaccuracies.

ASIA PLUS SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015

The Thai language research reports and information contained therein are compiled from public data sources and our analysts' interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.

SECURITIES CO.,LTD. Broker#8. Research Protection @Copyright 2015"

Investment Strategy

Monday, March 9, 2020

Oil prices plummeted as OPEC deal failed, pressuring oil, refinery, and petrochemical plays. The COVID-19 outbreak is getting more worrying in some countries. SET Index is still expected to fall further. We recommend selling PTTEP to cut loss and switching to LH and AOT. Top picks are CPALL(FV@B91) and LH(FV@B12).

SET Index 1,364.57 Change (pts) -26.26 Market Cap (Million B) 52,202

Watch SET Index signal today

The number of COVID-19 cases outside China is still increasing, especially in the US, Italy, South Korea, and China. Last Friday, SET Index plummeted after rising for three consecutive days and closed at 1,364.57 pts, down 26.26 pts (-1.89%) with trading value of B52.1bn. The market was pressured by 1) energy plays, especially PTT (-3.85%), PTTEP (-2.74%), GPSC (-2.58%), 2) banking plays, led by SCB (-4.65%), KBANK (-4.49%), and BBL (-1.15%), and 3) ICT plays, led by ADVANC (-1.75%), INTUCH (-1.38%), and DTAC (-5.03%), as well as other big-cap stocks, e.g. AOT (-1.17%), SCC (-2.47%), and PTTGC (-3.43%).

The OPEC meeting turned out disappointing. Russia rejected additional 1.5 million bpd oil output cut, while Saudi Arabia will raise oil production from 9.9 to 12 million bpd and cut OSP premium for all crude oil prices. As the OPEC deal failed, oil excess supply (oversupply) would increase further, so oil prices have plummeted severely and probably remain low further. We recommend staying away from all oil-related plays, including refinery and petrochemical plays; we recommend selling PTTEP to cut loss. Meanwhile, this would benefit industries with production cost mainly from oil. Main focus revolves around economic stimulus measures intended to alleviate COVID-19 impact, especially two-month B1,000 cash handout for low-income people and independent workers; these measures would benefit commerce plays, including CPALL and JMART in our portfolio. Some of SSF conditions are eased up, e.g. 1) investing more than 65% of portfolio in stocks and 2) extending investment cap (still unclear), but it would not boost SET Index significantly. Compared with LTF buying, fund inflow from SSF would plummet significantly. Considering fundamentals this morning, SET Index may plummet to 1,330 pts. Sell PTTEP to cut loss and switch to AOT and LH. Top picks are CPALL and LH.

COVID-19 infection slows down in China but fast outside China

The latest number of COVID-19 infection cases worldwide was 109,977. The number of infections in China was 80,735, slowing down significantly, while 58,600 cases have been cured so far; these are positive signs. However, infection outside China is still worryingly fast, especially in South Korea, Italy, and Iran. Thai workers in South Korea have returned to Thailand, causing fear and raising economic concern. Overall, the COVID-19 outbreak is still pressing the economy and stock markets worldwide.

Net Buy and Sell by Investor Type (Million B) Foreign -4,301.53 Proprietary -431.73 Institutional 6,178.66 Retail -1,445.41

Therdsak Thaveeteeratham Fundamental Investment Analyst on Capital

Market, Technical Investment Analyst License No: 004132

Paradorn Tiaranapramote Fundamental Investment Analyst on Securities

License No: 075365

Takit Chardcherdsak Fundamental Investment Analyst on Securities

License No: 087636

Wanapruk Komonwitayatorn Fundamental Investment Analyst on Securities

License No: 110506

Pawat Pattrapong Quantitative Analyst Assistant

Market Talk Investment Strategy | Research Division

COVID-19 cases in vs outside China

Source: World ometer / ASPS Research

Govt launches consumption boost policies, benefiting commerce plays: CPALL, JMART

Last Friday, the economic cabinet approved economic stimulus measures to alleviate impact of the COVID-19 outbreak as follows:

Cash handout of B1,000 through e-payment channel for 10 million people (fewer than 14.6 million expected), focusing on low-income people, farmers, and independent workers, effective in April-May 2020 (sooner than May-July expected); this would inject money into the industry system.

Soft loan with 0.01% interest rate for SMEs through Government Savings Bank (GSB). Withholding tax deduction by threefold of wage payment for SMEs, effective on

April 1 – July 31, 2020.

All these would be proposed for cabinet approval on March 10, 2020. They are expected to somehow boost household purchasing power and benefit commerce plays. We like CPALL(FV@B91) and JMART([email protected]).

New SSF conditions not supporting SET Index as much as LTF

LTF buying tended to increase and exceed selling (redemption) every year. Particularly, LTF buy rally in 2019 (last year of LTF) was as high as B74bn, higher than the three-year average of B71bn/year.

LTF buying vs selling (redemption)

Source: SEC / ASPS Research

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

100,000

105,000

110,000

12-F

eb-2

013

-Feb

-20

14-F

eb-2

015

-Feb

-20

16-F

eb-2

017

-Feb

-20

18-F

eb-2

019

-Feb

-20

20-F

eb-2

021

-Feb

-20

22-F

eb-2

023

-Feb

-20

24-F

eb-2

025

-Feb

-20

26-F

eb-2

027

-Feb

-20

28-F

eb-2

029

-Feb

-20

01-M

ar-2

002

-Mar

-20

03-M

ar-2

004

-Mar

-20

05-M

ar-2

009

-Mar

-20

World CHINA Outside China (rhs)

40.5 45.256.3 63.7 58.7 64.5

76.6 74.0

-32.9 -27.4 -24.4 -28.4-42.1 -51.2 -42.8 -50.7

1.23

1.65

2.312.24

1.391.26

1.791.46

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

-180

-130

-80

-30

20

70

120

170

2012 2013 2014 2015 2016 2017 2018 2019

LTF Buying LTF Selling BUY/SELL ratio (RHS)

Billion B X


However, the government discontinued LTF tax deduction and launched super saving funds (SSF) instead. Some SSF conditions would be revised to make them more similar so LTF (e.g. investing more than 65% of portfolio in stocks), while the following aspects would remain different from LTF:

Maturity term – LTF has maturity term of seven calendar years. Yet, SSF would have maturity term of ten calendar years from the buying date.

Trading period – SSF would be available for trading around April-June 2020 (only three months).

Investment cap – Whether SSF investment cap for tax deduction would be extended from B0.2m/year to B0.5m/year is still unclear; details may be disclosed at the cabinet meeting this Tuesday.

Investors still have to watch how the new SSF conditions will turn out. SSF is probably not as attractive as LTF, but it would still have positive sentiment and keep SET Index from falling while matured LTFs are sold.

OPEC agreement fails, hurting refinery, petrochemical plays: PTTEP, PTT

The meeting between OPEC and non-OPEC oil producers late last week turned out disappointing, causing global crude oil prices to plummet 30% from last week to US$40 on average, as follows:

Russia – Russia rejected the OPEC's proposal for additional 1.5 million bpd oil production curb (initially expected to agree). Notably, Russia is the world's second biggest oil producer with the amount of 11.2 million bpd (13.7% of worldwide production), following the US with oil production of 12.8 million bpd (15.6% of worldwide production).

Saudi Arabia – Saudi Arabia announced that, after the OPEC's deal to curb oil production by 1.7 million bpd ends, it will raise oil production above 9.9 million, probably reaching 12 million bpd. Saudi Arabia will also lower official selling prices (OSP) premium for all its crude oil prices after March; it will slash oil OSP for export to Europe by US$8, for the US by US$7, and for Asia by US$6.

All these factors would increase excess crude oil supply worldwide. Meanwhile, COVID-19 is still spreading and takes time to recover, slowing down worldwide oil demand longer.

We expect global crude oil price to swing down longer. Dubai crude oil price is US$47 at present and the YTD average is US$58.04, far below our 2020 assumption of US$65. This would hurt the following sectors:

Energy – Based on our sensitivity analysis, every US$5 decrease in crude oil price from our assumption would decrease fair values of PTTEP(FV@B170) and PTT(FV@B56) by B10-14 and B2-3, respectively. Stay away from energy plays for the short term.

Refinery-petrochemical – Although the refinery industry would benefit from lower oil prices, finished oil prices are expected to drop as well, so GRM would remain low while inventory loss (stock loss) would increase significantly. Meanwhile, the petrochemical industry would benefit from lower feedstock cost, but downstream product prices would drop as well, so petrochemical spreads would remain low. We reiterate UNDERWEIGHT for refinery and petrochemical industries.


Global oil demand vs supply

Source: OPEC

Sensitivity analysis: oil price vs SET Index target

Saudi Arabia announced an increase in oil production and a cut in official selling prices (OSP), which decrease income for the oil industries. As a result, global crude oil prices plummeted more than 20% this morning, causing global stock markets to plummet. Particularly, US-based Dow Jones Futures plunged more than 1,000 pts. SET Index may plummet as oil-related industries make up almost 15% of market capitalization, especially oil (12%) and petrochemical (2.9%).

Global crude oil price is expected to swing down further. Dubai crude oil price is US$39 at present and the YTD average is US$56.8, far below our 2020 assumption of US$65.

Based on our sensitivity analysis, every US$5 decrease in crude oil price from our assumption would decrease market earnings by B10bn and EPS by B0.93 from our 2020 forecasts, lowering SET Index target by 16 pts. Provided that Dubai crude oil price stays at US$36 for the rest of this year, the 2020 average price would be US$42.5, so SET Index target would drop to 1,384 pts.

Although SET Index still has upside now, oil price is expected to decline further from now on. We recommend staying away from oil stocks for a while.


Sensitivity on SET Index target

Source: ASPS Research

SET vs Sector Return 2019 SET vs Sector Return 2020 YTD

Source: ASPS Research Source: ASPS Research

0.8%

-0.4%

-4.6%

-7.1%

-8.9%

-9.4%

-9.4%

-10.7%

-11.4%

-11.5%

-12.0%

-12.7%

-13.7%

-14.8%

-16.1%

-17.1%

-19.1%

-19.3%

-20.7%

-21.5%

-35% -25% -15% -5% 5%

AGRI

FIN

FOOD

CONS

ICT

COMM

ETRON

HELTH

INSUR

PROP

SET

ENERG

TRANS

AUTO

CONMAT

STEELS

TOURISM

BANK

PETRO

MEDIA

Change from

Crude Oil Price

Assumption

Impact on

Market

Earnings

Impact on

EPS

Impact on

SET Index

Target

US$5 Cut B10,000m B0.93 16 pts

65 - 85.59 1455

60 10,000 84.66 1439

55 30,000 83.72 1423

50 40,000 82.79 1407

45 50,000 81.86 1392

42.5 55,000 81.39 1384

40 60,000 80.93 1376


Market Talk Top Picks

Source: ASPS Research

StartDate Avg. Cost Last

MCS 14-Jan-20 5% -8.54% 9.95 9.10 14.20 5.88 6% 7.96

Thanks to 4Q19 export volume to Japan of 10,000-13,000 tons, 2019

profit is expected to grow 31.7%yoy. 2020 profit would shine further,

driven by Shibuya as well as other projects.

DIF 17-Feb-20 20% -1.09% 16.78 16.60 n.a. n.a. n.a. 6.23Dividend yield is expected over 6%p.a. Premium is only 9%. Positive

sentiment from increasing 5G usage

STEC 14-Feb-20 10% -8.28% 16.90 15.50 24.00 15.68 1% 2.90

2020 profit is not worrying. Backlog of B88bn will generate revenue until

2023; B37bn of backlog would make revenue in 2020 and boost profit

by 20%yoy.

CPALL 24-Feb-20 10% -1.07% 70.00 69.25 91.00 21.56 15% 2.07The government's economic stimulus measures would be launched after

the 2020 budget bill is passed and ready for disbursement in April 2020.

AOT 27-Feb-20 5% 1.60% 62.50 63.50 75.76 32.71 -21% 1.30

COVID-19 outbreak in China has slowed down after one month passed.

COVID-19 infection in Thailand would also slow down in summer. AOT

has over 15% upside now.

CPF 19-Feb-20 15% -4.35% 28.75 27.50 40.00 10.08 17% 2.911Q20 normalized profit is expected to grow robustly from 4Q19. Pork

price in Thailand rebounds significantly, fully boosting 1Q20 profit.

PTTEP 03-Mar-20 10% -4.05% 111.00 106.50 170.00 8.81 -4% 5.632H19 dividend yield is higher than 3%. Long-term fundamentals are still

strong as sales volume is driven by new projects.

JMART 05-Mar-20 10% -3.36% 7.45 7.20 11.62 10.23 13% 6.94

2020 profit is expected to grow 13%, driven by JMT's debt purchase for

management. Yet, share price fell YTD, so 2020 P/E ratio drops to 10x,

widening upside.

INTUCH 27-Feb-20 15% 0.31% 53.33 53.50 73.10 15.02 9% 4.84Despite not remarkable growth, INTUCH is favorable for solid

fundamentals and over 20% discount from ADVANC.

Stock Classification

Accumulated contribution returns since beginning of the year

Stocks WeightAccumulated

Return

PriceFair Value

PER

2020F

EPS Growth

20F

Dividend

Yield Strategist Comment

Today we exclude PTTEP from portfolio and increase investment in AOT by 5% and LH by 5%.

Accumulated returns since our recommendation

Accumulated returns

Beta Portfolio

1.6%

0.3%

-1.1%

-1.1%

-3.4%

-4.1%

-4.3%

-8.3%

-8.5%

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0%

AOT

INTUCH

CPALL

DIF

JMART

PTTEP

CPF

STEC

MCS

Dividend40%

Defensive25%

Growth35%

Dividend Defensive Growth

STECCPFCPALL

DIFAOT

MCSJMARTINTUCHPTTEP

Min,0.59

Beta Portfolio, 1.04

Max,1.573849

-4.83%

1.93%

-1.83%

-13.63%

1.79%

-1.89%

-16.0%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

YTD MTD -1D

ASPS Portfolio SET Index

Equity Calendar

Research DivisionMarch 9, 2020

Monday Tuesday Wednesday Thursday Friday9 10 11 12 13

XD XD Par decrease XD XD

AYUD @B0.75 AMANAH @B0.0111111111 QHOP B8.29 par (from B8.44) ABPIF @B0.1367 CAZ @B0.1071

BROCK @B0.02 AMANAH 10 existing : 1STD @free AIMCG @B0.2000 DDD @B0.125

DREIT @B0.0294 ASN @B0.0.011111111111 XD AIMIRT @B0.2047 DOD @B0.35

DRT @B0.20 ASN 5 existing : 1STD @free BA @B0.10 ASIMAR @B0.05 LALIN @B0.21

GFPT @B0.20 B-WORK @B0.1956 BDMS @B0.30 ASP @B0.07 MCS @B0.40

HANA @B0.65 BKER @B0.0600 CSC @B3.90 BGRIM @B0.22 PDG @B0.10

KIAT @B0.03 FN @B0.0037 CSC-P @B5.40 BKI @B5.00 PLAT @B0.20

MEGA @B0.41 FORTH @B0.30 DOHOME 6 existing: 1STD @free CPW @B0.059 PRIN @B0.03

NKI @B1.00 MGT @B0.04 DOHOME @B0.018518518519 CTARAF @B0.0845 PYLON @B0.27

NKI 35 existing: 1STD @free MTI @B2.90 KBS @B0.06 GLOBAL @B0.2052910053 PSTC @B0.01

OTO @B0.10 SAAM @B0.025 LIT @B0.24 GLOBAL 21 existing: 1STD @free RJH @B0.50

QLT @B0.30 SAMART @B0.15 LUXF @B0.1600 HARN @B0.18 SIRI @B0.06

SR @B0.03 SAMTEL @B0.32 M-II @B0.1400 M-CHAI @B3.00 SKE @B0.025

SRIPANWA @B0.1131 SE @B0.05 M-PAT @B0.0220 SCP @B0.40 SPG @B0.70

TKN @B0.15 SMK @B2.03 M-STOR @B0.0980 SUSCO @B0.11 TAKUNI @B0.0274

TTW @B0.30 SNP @B0.50 MNIT @B0.025 THG @B0.30 TIP @B1.15

SNP 50 existing: 1STD @free MNIT2 @B0.03 TPIPP @B0.20 TNITY @B0.44

XN TFG @B0.055 MSC @B0.45 UVAN @B0.17 TPP @B0.60

DREIT @B0.0794 TNR @B0.24 NSI @B5.20 (spec. div 3.64) WICE @B0.09 TRUE @B0.09

WORK @B0.30 OGC @B0.57 XO @B0.05 TVO @B0.75

PMTA @B0.50 UNIQ @B0.27

XN PSH @B0.95 XN

SPRIME @B0.174 PTG @B0.50 ABPIF @B0.7657 Conversion

SKN @B0.0306 CTARAF @B0.0445 ALT-W1 1:1w @B3.00

SVOA @B0.04 UKEM-W2 1:1w @B0.50 (final)

SVOA-PA @B0.04

TK @B0.55

TMD @B0.55

TPIPL @B0.03

TSE @B0.12

TWP @B0.074

VCOM @B0.16

VIH @B0.14

WINNER @B0.10

XW

TAPAC 2 exisitng: 1TAPAC-W4 @free

16 17 18 19 20XD XD XD XD XD

AGE @B0.09 BJCHI @B0.13 GRAMMY @B0.20 2S @B0.07 CCET @B0.03

CMR @B0.0585 BM @B0.08 CHARAN @B0.50 KCAR @B0.34

CWT @B0.0381 CGH @B0.0125 EA @B0.30 ROH @B1.4346

JKN @B0.14 CM @B0.06 MACO @B0.016

JKN 8 existing: 1STD @free CNT @B0.04 ML @B0.03 XW

LANNA @B0.30 ZIGA @B0.039 NTV @B1.58 CIG 2 existing: 1CIG-W8 @free

SEAOIL @B0.011111111111 PATO @B0.60

SEAOIL 10 existing : 1STD @free SANKO @B0.05

SPCG @B0.72 TBSP @B0.45

TNPF @B0.108 TKS @B0.40

TQM @B1.10

UAC @B0.135 XNUKEM @B0.0162 HPF @B0.122 MPC meeting

23 24 25 26 27Last trading day XD XD Share delist

THE-W2 BAT-3K @B1.00 BH @B2.05 SVI-W3

BH-P @B2.05

XE TMILL @B0.11 XD

THE-W2 1:4w @B3.50 (final, "SP") TSTE @B0.10 DCON @B0.015

XR

A5 13:1n @B1.00

ConversionSVI-W3 1.5098:1w @B2.9408 (final)

30 31XDCPN @B1.30

SF @B0.22

ConversionGLOCON-W4 1:1w @B0.50

PROUD-W2 1.174:1w @B1.533

SCB-P 1:1

SINGER-W1 1:1w @B7.00

SINGER-W2 1:1w @B14.00

VGI-W2 1:1w @B10.00

BOT : Feb-20 Trade

March 2020

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