Market Talk Investment Strategy Research Division

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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.

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Investment Strategy

Friday, February 14, 2020

COVID-19 has infected 12 countries that are Thailand's major trading partners making up 54.7% of Thailand's export, thus causing Thailand's export to decelerate. Still, the economy would be mainly driven by 2020 budget disbursement. We invest more in STEC while sell TU to take profit. Top picks are STEC(FV@B22) and PYLON(FV@B7.35).

SET Index 1,532.77 Change (pts) -7.07 Market Cap (Million B) 46,420

Watch SET Index signal today

After China used the new diagnostic and classification system (counting infected people with no symptoms), the number of confirmed cases increased at an accelerating rate, raising worldwide concern. Similar to global stock markets, SET Index yesterday was in a negative territory for the entire day and closed at 1,532.77 pts, down 7.07 (-0.46%) with trading value of B46.4bn. The market was mainly supported by 1) energy plays, especially PTT (-0.58%), PTTEP (-2.75%), and GPSC (-1.91%), 2) transportation plays, especially AOT (-0.35%), BEM (-2.65%), BTS (-1.54%), and 3) petrochemical plays, led by IVL (-1.57%) and PTTGC (-2.31%), as well as some other big-cap stocks, e.g. CPALL (-0.69%), HMPRO (-2.04%), and SCC (-0.82%).

The COVID-19 outbreak has more and more adverse impact on Thailand's export. Notably, COVID-19 has infected 12 countries that are Thailand's major trading partners making up 54.7% Thailand's total export; countries that make up over 4% of Thailand's export and suffer from the outbreak include China, Japan, South Korea, Vietnam, Hong Kong, and Malaysia. Thus, Thailand's export is expected to decline from now on. We initially expect Thailand 2020 export to fall 1.5%, but the outbreak may pose additional downside risk. Yesterday, the House of Representative passed the second and the third readings of the 2020 budget bill. The bill will be forwarded to the Senate for deliberation on February 17 and finally presented to the King for royal endorsement. The 2020 budget bill is preliminarily expected to be ready for disbursement in March 2020, which will allow the government to stimulate the economy further; this would benefit the contractor industry the most, followed by industrial estate. Weak THB slows down fund inflow. However, fund outflow and THB depreciation is expected to slow down from now on. For our portfolio today, we increase investment in STEC by 10% while sell TU to take profit. Top picks are STEC and PYLON.

Ongoing COVID-19 outbreak to hurt 2020 export

Since COVID-19 (2019 coronavirus) was first detected in December 31, 2019, more and more people were infected every day. Latest confirmed case totaled 64,241, an increase of 8% from the previous day, while latest death toll was 1,489, increasing 10% from the previous day. COVID-19 has infected 29 countries so far. Most cases outside China are in Asia (especially in Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia, and Taiwan), while there are fewer cases in Europe and the US.

Net Buy and Sell by Investor Type (Million B) Foreign -1,323.11 Proprietary -324.54 Institutional -91.55 Retail 1,739.21

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

Source: gisanddata

The COVID-19 outbreak has infected many Asian countries, and hurting Thailand's economy. The number of tourists visiting Thailand is expected to drop, while 2020 export may suffer more than expected. We expect 2020 export to contract 1.5%yoy and mark the average of US$20.2bn/month, but there is additional downside risk from the following issues:

Thailand's major trading partners in Asia made up the largest share of COVID-19 cases, especially China (63,686 cases) that makes up 11.9% of Thailand's export, Singapore (58 cases, 3.6% of export), Hong Kong (53 cases, 4.8% of export), South Korea (28 cases, 4.9% of export), Japan (28, 10% of export), and Malaysia (19 cases, 4.3% of export). Notably, COVID-19 has infected 12 countries that are Thailand's major trading partners making up 54.7% Thailand's 2019 total export. The COVID-19 outbreak would continue to slow down Thailand's export and the economy in 2020.

Thailand’s Asian export markets with high COVID-19 infection counts

Source: Ministry of Commerce

Countries No. of CasesThailand's

Export (%)

China 63,686 11.9

Singapore 58 3.6

Hong Kong 53 4.8

South Korea 28 4.9

Japan 28 10.0

Malaysia 19 4.3

Taiwan 18 1.6

Vietnam 16 4.9

Philippines 3 2.8

India 3 3.0

Cambodia 1 2.9

Sri Lanka 1 0.2

Total 63,914 54.7

Market Talk Investment Strategy | Research Division

Notably, Asian export markets account for 63% of Thailand's total export, especially auto (9.1% of Thailand's export in Asia), computer (5.6%), plastic resin (5.1%), finished oil (4.4%), and jewelry (4.4%). Notably, Thailand's top ten export goods that make up 45% of Thailand's total export to Asia would be affected.

Thailand’s top 10 export goods to Asia markets

Source: Ministry of Commerce

The EU entered a free trade agreement (FTA) with Vietnam, effective in July 2020. Meanwhile, Thailand has no FTA deal with the EU (8% of Thailand's export). Thailand would lose competitiveness compares with Vietnam in terms of international trade tariffs. This would adversely affect export of auto and electronic goods (Thailand's top two export goods) as well as non-alcoholic beverage.

These two factors would pressure Thailand's 2020 export from our assumption (1.5% contraction) and pose downside risk on Thailand's 2020 GDP growth.

THB to determine fund flow

Almost two months have passed since 2020 began. Foreigners are net sellers in Asian stock markets at the total of US$961m, net buying in South Korea and Indonesia versus net selling in Taiwan, the Philippines, and Thailand.

Monthly Foreign Fund Flow in Asia

Source: Bloomberg / ASPS Research

Particularly, Thailand faced the largest YTD foreign net selling of US$808m or B25bn as a result of negative factors in and outside Thailand: 1) the 2020 budget bill that has been delayed by 4-5 months, 2) the drought that is probably the worst one in 40 years, 3) PM2.5 air pollution, 4) the interest rate cut, and 5) the COVID-19 outbreak.

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Jew

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%

Date Indonesia Philippines S. Korea Taiwan Thailand Total2018 -3656 -1080 -5676 -12182 -8913 -31508

2019 3465 -240 924 9447 -1496 12101

2020 (ytd) 91 -117 219 -347 -808 -961

Jan 2020 1 -164 -165 -751 -562 -1641

Feb 2020(mtd) 90 48 384 404 -246 679

Unit : Million US$

Market Talk Investment Strategy | Research Division

All these negative factors have weakened THB by more than 3%ytd, while weak THB normally hinders fund inflow. Notably, THB tended to weaken after interest rate cuts or after SARS and MERS epidemics.

Weak THB normally results in fund outflow. Based on our quantitative study, every 1% THB depreciation would trigger foreign fund outflow (net selling) in the stock market of B8.5bn. From now on, fund outflow is expected to slow down as COVID-19 fear softens, while THB is now near B31.5/US$, so SET Index would swing narrowly for a while.

2020 budget bill makes progress. Favor STEC PYLON

2020 government budget disbursement is making progress. Yesterday, the 2020 budget bill passed the second and the third readings. It will be forwarded to the Senate for deliberation on February 17, which would take one day. Then, it will be presented to the King for royal endorsement and then published in the Royal Gazette. The 2020 budget bill is anticipated to take effect, ready for disbursement, within March 2020.

After the 2020 budget bill has been delayed by four months, it would be ready for disbursement sooner with the larger amount. The government is expected to disburse 2Q19-3Q19 budget of around B122bn/quarter (80% of our assumption), higher than the two-year average disbursement of B96bn/quarter.

Progress on the budget bill would have positive sentiment on the following sectors:

Contractor – Contractor stocks already plummeted more than 50% from 2017, so they have favorable valuation now. Thanks to this good news, they are expected outperform the SET again. We like STEC, CK, and PYLON.

Construction material – This issue would enable road construction and boost asphalt demand. We favor TASCO.

Industrial estate – Government investment projects are making progress, reviving confidence for foreign firms to invest in Thailand. We favor WHA and AMATA.

Banking – Government investment budget will be ready for disbursement, boosting the economy and loan demand and having positive sentiment on gig-cap banking plays. We favor BBL and KBANK.

Valuation of recommended stocks today

Source: SET / ASPS Research

Company SectorLast Price

(13/02/2020)FairValue Upside PER 20F Div Yield 19F (%)

ContractorPYLON CONS 5.15 7.35 42.7% 12.58 5.00

STEC CONS 16.70 25.00 49.7% 18.70 2.40

Construction MaterialTASCO CONMAT 22.60 25.00 10.6% 12.25 3.98

Industrial EstateAMATA PROP 17.10 35.70 108.8% 8.60 4.26

WHA PROP 3.40 4.89 43.9% 13.01 4.34

Big-cap BanksBBL BANK 148.00 201.00 35.8% 7.71 4.39

KBANK BANK 143.00 164.00 14.7% 9.80 3.50

Market Talk Investment Strategy | Research Division

Top picks are STEC and PYLON for the following factors:

STEC(FV@B25.00) – STEC's business in 2020 is not worrying. It has B88bn backlog that will generate revenue until 2023. STEC is expected to make 2020 revenue of B37bn (up 20%yoy). After the 2020 budget was already passed by the House of Representatives, it is anticipated to take effect in March 2020. Thus, the biddings of mass rapid transit extension projects and double-track railway projects phase 2, valued over B600bn in total, are anticipated to be held this year. As Thailand's major contractor, these project would significantly provide works for STEC. Although the share price already plummeted in the past 4-5 months, its fundamentals (financial position, backlog in hand, and businesses opportunities) are still solid, while upside is as high as almost 50%. This is a good entry point to accumulate gradually.

PYLON(FV@B7.35) – 4Q19 profit is expected to grow robustly thanks to foundation pile projects at Queen Sirikit Convention Center and Bangkok Mall as well as Ideo Rama 9 construction project. PYLON's backlog is B1,540m now. If 2020 budget bill is passed and ready for disbursement, many ongoing projects would be able to make progress, e.g. Dao Khanong – Rama 3 expressway (contracts 1-3), Rama 2 elevated expressway, and Thailand-China railway. 2020 profit is estimated to grow 11.2%yoy. The price has weakened, whereas its earnings are enjoying positive momentum and probably make new highs, so 2020 expected P/E ratio drops to 11x. 2020 dividend yield is expected above 5%.

SET vs Sector Return 2019 SET vs Sector Return 2020 YTD

Source: ASPS Research Source: ASPS Research

Market Talk Investment Strategy | Research Division

Market Talk Top Picks

Note: We bought ROBINS during the period that was available for CRC share swap, so price calculation is based on the tender o ffer price of B66.50

Source: ASPS Research

StartDate Avg. Cost Last

MCS 14-Jan-20 15% 6.53% 9.95 10.60 14.20 6.85 13% 6.70

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.

WHA 12-Feb-20 10% 2.41% 3.32 3.40 4.89 13.01 10% 4.34

WHA is expected to show remarkable business growth, driven by sales of

assets worth B4.8bn to REIT. 2019 profit is expected to grow 10.5%yoy.

2020 profit is estimated to make a new high of B3.5bn.

POPF 21-Jan-20 15% 0.42% 12.75 12.80 n.a. n.a. n.a. 7.84 Dividend yield expected over 8%p.a. Low fluctuation. Safe haven.

TU 27-Jan-20 10% 4.90% 14.30 15.00 20.00 13.06 39% 4.00Tuna and shrimp prices rebound continuously in 2020. Plus, TU would

benefit from weak THB.

PTTEP 06-Feb-20 10% 2.21% 121.32 124.00 170.00 10.25 -4% 4.84Oil prices jump thanks to positive projections on 2019 coronavirus cure,

good for energy plays like PTTEP.

KKP 05-Feb-20 10% 2.19% 68.50 70.00 79.50 9.15 1% 6.43Most loans subject to fixed interest rate while some deposits subject to

floating rate, boosting KKP's NIM.

PYLON 07-Feb-20 10% 0.00% 5.15 5.15 7.35 12.86 11% 6.36

4Q19 profit expected to grow significantly thanks to foundation pile

projects at Queen Sirikit National Convention Center and Bangkok Mall.

Dividend yield is expected over 5%.

EASTW 07-Jan-20 10% 5.41% 11.10 11.70 14.00 16.15 9% 3.89

EASTW benefits from the drought. It is gradually raising raw water

selling price with new formula. 2020 profit is expected to grow for the

first time in five years.

ROBINS

(swap for

CRC)

30-Dec-19 10% 1.14% 65.75 66.50 70.00 19.21 10% 2.16

ROBINS may have capital gain from the share swap with CRC owing to

CRC's stronger business bases, better growth potential, and better

business diversification (food, hardline, fashion).

Stocks Fair Value

Accumulated returns

Accumulated returns since our recommendation

WeightDividend

Yield

Accumulated

Return

EPS Growth

20F

PER

2020F

Price

Today we sell TU to take profit and switch to STEC

Beta Portfolio

Strategist Comment

Stock Classification

Accumulated returns since beginning of the year

6.53%

5.41%

4.90%

2.41%

2.21%

2.19%

0.42%

0.00%

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

MCS

EASTW

TU

WHA

PTTEP

KKP

POPF

PYLON

Dividend55%

Defensive25%

Growth20%

Dividend Defensive Growth

MCSPYLONKKPPTTEP

TUWHA

ROBINSEASTWPOPF

Min,0.40

Beta Portfolio, 0.81

Max, 1.23

6.30%

2.07%

-0.74%

-2.98%

1.23%

-0.46%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

YTD MTD -1D

ASPS Portfolio SET Index

Equity Calendar

Research DivisionFebruary 14, 2020

Monday Tuesday Wednesday Thursday Friday10 11 12 13 14

Par decrease XD XD XD

MIT B8.70 par (from B8.875) CPNCG @B0.2005 METCO @B10.00 1DIV @B0.24

DIF @B0.2610 PTTEP @B3.75 GCAP @B0.10

PUBLIC HOLIDAY XD POPF @B0.2569 TDEX @B0.27

(Makha Bucha Day) DTAC @B1.61 PPF @B0.2107

SIRIP @B0.15 XR

HYDRO 5:1n @B0.29

XN

ERWPF @B0.1304 Conversion

TCAP-P 1:1

17 18 19 20 21

XD Last trading day XD XD Conversion

JASIF @B0.20 UKEM-W2 ADVANC @B3.56 MC @B0.35 PACE-W2 1:1w @B2.00

STAR-W3 1:1w @B4.00 (final)

XR XD XE XR

NEX 4:1n @B2.50 RAM @B0.90 UKEM-W2 1:1w @B0.50 (final, "SP") KWG 1.7561:1n @tba

Conversion Conversion

MINT-W6 1:1w @B43.00 NUSA-W3 1:1w @B1.00 (final)

24 25 26 27 28

XD XB XD XD XD

FTREIT @B0.1670 CPNREIT GPSC @B0.80 IMPACT @B0.30 MBKET @B0.18

GLANDRT IRPC @B0.04 SPVI @B0.10 PICO @B0.25

LPN @B0.40 PICO-P @B0.25

XD PLANB @B0.0618 Conversion PM @B0.53

GLANDRT @B0.2078 META-W4 1:1w @B3.50 PT @B0.40

GLANDRT @B3.9040

INTUCH @B1.30 Conversion

LHPF @B0.0900 AKR-W1 :1w @B1.00

LHHOTEL @B0.2900 ECL-W3 1:1w @B1.85

LHSC @B0.1550 SUPER-W4 1:1w @B2.49

QHHR @B0.1980

QHPF @B0.2430

THCOM @B0.20

VGI @B0.045

XN

GLANDRT @B0.0012

Conversion

NESDB - GDP 4Q/18 ECF-W3 1.0008:1w @B4.9958 BOT : Jan-20 Trade

Monday Tuesday Wednesday Thursday Friday2 3 4 5 6

XD XD

AMATAR @B0.17 KSL @B0.05

XE XR

SVI-W3 1.5098:1w @B2.9408 (final,"SP") T 10:1n @B0.03

Conversion

MOC : Feb-20 CPI WHA-W1 10.2396:1w @B3.4181 (final)

9 10 11 12 13

Conversion

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

16 17 18 19 20

XD

MACO @B0.016

MPC meeting

23 24 25 26 27

Conversion

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

30 31XD

SF @B0.22

BOT : Feb-20 Trade

Monday Tuesday Wednesday Thursday Friday1 2 3

XR XD

IRCP 5:1.50n @B0.58 COTTO @B0.012

Q-CON @B0.18

MOC : Mar-20 CPI

6 7 8 9 10

XD XD

KBANK @B4.50 S11 @B0.28

PUBLIC HOLIDAY SCC @B7.00

(Chakri Memorial Day ) TOG @B0.15

MPR Press Conference

13 14 15 16 17

XD

KTC @B0.88

PUBLIC HOLIDAY PUBLIC HOLIDAY PUBLIC HOLIDAY

(Songkran Festival) (Songkran Festival) (Songkran Festival)

February 2020

March 2020

April 2020

C = conversion, CB = convertible bonds, PP = private placement, p = preferred shares, w = warrants, n = new, STD = stock dividend, NPG = Non-Performing Group Provided by Amika (ext 1229)