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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.

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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

Thursday, November 14, 2019

Bond yields have stayed flat after rallying robustly while gold price has risen, reflecting that fund flow from safe assets to stocks has slowed down. 3Q19 earnings turned out worse than expected. SET Index would still undergo correction. We recommend partly investing in POPF. Top picks are still CPALL(FV@B100) and CPN(FV@B94).

SET Index 1,615.14 Change (pts) -11.06 Market Cap (Million B) 52,456

Watch SET Index signal today

There has been no new positive factors, while 3Q19 earnings mostly turned out worse than expected. SET Index weakened for the entire day and closed at 1,615.14 pts yesterday, down 11.06 pts (-0.68%) with trading value of B52.4bn. The market was mainly weakened by 1) energy plays, especially GULF (-2.05%), EA (-4.47%), BGRIM (-3.79%), and PTTEP (-0.81%), 2) commerce plays, led by CPALL (-1.25%), RS (-2.60%), and BJC (-4.04%), and 3) banking plays, particularly KBANK (-1.32%) and BBL (-1.69%), as well as some big-cap stocks like AOT (-1.57%), MINT (-4.03%), and STEC (-19.55%).

Previously expected to take a positive turn, US-China trade talk has become uncertain, pressuring financial markets; this has slowed down fund inflow from safe assets (bond and gold) to risky assets (stock). Bond yields have stayed flat after rallying robustly, while gold price has rebounded slightly, so fund inflow in stocks would continue to weaken. Meanwhile in Thailand, the government's economic stimulus measures have become more certain. The cabinet approved Chim-Shop-Chai phase 3, while the government is ready to implement additional measures if the economy has not rebounded yet. Still, these measures would only benefit mainly commerce and tourism plays. 3Q19 net profit of 428 SET-listed companies accounting for 83% of market capitalization has been reported at the combined value of B201bn so far, decreasing 1.7%qoq and 18.0%yoy; market earnings turned out worse than expected, so 2019-2020 market earnings have more downside risk. Thus, SET Index today would undergo further correction around 1,610-1,640 pts. We recommend playing it safe with property funds, e.g. POPF. For our portfolio today, we reduce investment in EA by 5% and JWD by 5% while switch to POPF. Top picks are still CPN and CPALL.

Trade war unclear. Fed to keep interest rate flat until 2020

Last week, global stock markets rebounded thanks to positive projection on US-China trade war. However, markets now lack driving force as trade war is still unclear. U.S. President Donald Trump declared that US shall not at a disadvantage in the trade talk with China and the US is ready to resume import tariff hikes against China if the trade deal fails. Meanwhile, according to Wall Street Journal yesterday, China is hesitating about proceeding with importing agricultural products from the US and China has not determined the amount of import yet (US$40-50bn initially expected). We still expect trade war to continue until U.S. presidential election in late-2020.

Net Buy and Sell by Investor Type (Million B) Foreign 557.95 Proprietary -227.86 Institutional -1,712.03 Retail 1,381.93

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

Jerdjaras Kaewkua Analyst Assistant

Wanapruk Komonwitayatorn Fundamental Investment Analyst on Securities

License No: 110506

Pawat Pattrapong Quantitative Analyst Assistant

Market Talk Investment Strategy | Research Division

US-China trade war pattern

Source: ASPS Research

According to Fed Chairman Jerome Powell's testimony to Congress, current Fed fund rate of 1.75% is an appropriate level, in line with the previous meeting. At the latest Fed meeting in October, Fed cut U.S. interest rate for the third time in 2019 and signaled that it would slow down interest rate cut until mid-2020.

We expect trade war would remain unclear and impact global stock markets, keeping them undergoing correction longer.

SET Index hibernating

Positive projection on US-China trade war truce deal is coming to an end; the market already absorbed this issue. SET Index already rallied more than 60 pts in the short time from 1,580 pts to 1,640 pts at present. However, US-China trade war has become unclear again. China is hesitating about importing U.S. agricultural goods, while the US may resume import tariff hikes if it is at a disadvantage over China.

Selling pressure on safe assets has continued. Similar to bond yields worldwide, Thailand's ten-year bond yield has rallied 20bp from the start of the month (MTD) to 1.71% at present.

Ten-year bond yields of Thailand, the US, Japan, and Germany

Source: Bloomberg / ASPS Research

Tariff Hike Preparation

Preparing tariff hike

Preparing protectionism measures

Actual Tariff Hike

Hiking import tariff

Imposing protectionism measures

Trade Talk

Relieving TensionPostponing next tariff hike

Partly exempting import tariff


Bond selling would slow down from now on as trade war issues are still unclear while bond yields have rebounded back to normal levels. Particularly, Thailand's ten-year bond yield has risen to 1.71%, higher than the key interest rate of 1.25%). Excess liquidity that has recently supported SET Index may slow down.

Thus, SET Index still lacks driving force and has limited upside now. SET Index today is expected around 1,605-1,630 pts, as if it is hibernating. We recommend partly investing in property fund plays with high dividend yield. Particularly, POPF has dividend yield expected at 7.6%p.a. It will pay 3Q19 dividend soon at B0.15; XD date is November 18, 2019.

Firms reporting 3Q19 earnings results

As of yesterday, 3Q19 net profit of 428 SET-listed companies accounting for 83% of market capitalization has been reported at the combined value of B201bn so far, decreasing 1.7%qoq from 2Q19 and 18.0%yoy from 3Q18. Preliminarily, 3Q19 net profit of the banking and agri-food sectors grew both qoq and yoy. In contrast, 3Q19 net profit of the energy-petrochemical, construction material, and electronic part sectors fell both qoq and yoy.

Weak 3Q19 earnings have more and more downside risk on 2019 total net profit (market earnings) forecast of B999bn (or EPS of B100.64); every B10bn decrease in market earnings from our forecast would lower EPS by B1 and weaken market earnings yield gap by 0.05%.

Weak earnings may discourage fund flow from switching from bonds to markets. We recommend cautious selective buying for big-cap domestic plays that has good growth potential in the long term and benefit from economic stimulus measures that are still laggard in terms of prices. Top picks are CPN(FV20@B94) and CPALL(FV20@B100).

Stay away from STEC for short term

Yesterday, the National Anti-Corruption Commission (NACC) found grounds to the accusation that four senior state officials demanded B20m payment from Japan-based Mitsubishi Hitachi Power Systems (MHPS) to allow the ship to temporarily use the dock near Khanom power plant and illegally transport construction equipment parts (power generation parts) for the construction of Khanom power plant. The NACC also founded evidences that STEC and its two executives were guilty of supporting state officials in bribery. After this, the NACC will forward its findings to the Attorney-General to adjudicate the criminal case.

This issue caused STEC plummeted 19.55% yesterday. It has been concerned that STEC might be blacklisted by government organizations and become disqualified for future bidding. Having executives alleged of wrongdoing, it has been concerned that STEC might lose qualification as a SET-listed company. Nevertheless, the NACC's investigation is not the final ruling yet; STEC is still deemed as innocent until the court makes the final judgment. According to the Secretary-General of the Anti-Corruption Organization of Thailand (ACT), a private company that is found guilty by the NACC will not be blacklisted under the

EPS'19F Chg. EPS'19F Yield Gap Chg. Yield Gap

100.64 4.89%

99.64 1 4.84% 0.05%

98.64 2 4.79% 0.05%

97.64 3 4.73% 0.06%

96.64 4 4.68% 0.05%

95.64 5 4.62% 0.06%


Government Procurement and Inventory Management Act B.E. 2560 (2017) and the Public-Private Partnership Act B.E. 2562 (2019).

Still, we believe this issue would not affect STEC's operation. Its current backlog of B90bn is enough to generate revenue until 2023. STEC's financial position is still strong, with cash in hand and investment budget of over B10bn at end-2Q19. However, uncertainty about this case would keep weakening STEC for the short term. Investors with low risk tolerance should stay away from STEC, while investors that are willing to accept higher risk can buy STEC for speculation. 2020 fair value is B25.00.

SET vs Sector Return 2018 SET vs Sector Return 2019 YTD

Source: ASPS Research Source: ASPS Research

5.7%

3.2%

-5.4%

-6.3%

-10.4%

-10.6%

-10.8%

-13.1%

-14.2%

-14.8%

-15.6%

-17.2%

-17.2%

-18.0%

-20.3%

-22.1%

-22.8%

-26.6%

-29.3%

-30.8%

-40% -30% -20% -10% 0% 10%

HELTH

FIN

TRANS

ENERG

PETRO

BANK

SET

COMM

ICT

CONMAT

PROP

AGRI

INSUR

ETRON

AUTO

TOURISM

FOOD

CONS

MEDIA

STEELS

24.9%

24.7%

19.5%

17.1%

14.3%

10.9%

6.2%

3.3%

-3.5%

-4.7%

-6.7%

-8.0%

-13.5%

-14.7%

-16.4%

-16.6%

-17.7%

-24.0%

-26.8%

-29.4%

-40

%

-30

%

-20%

-10

%

0%

10%

20%

30%

FIN

ICT

MEDIA

TRANS

FOOD

ENERG

COMM

SET

INSUR

CONMAT

HELTH

PROP

BANK

AUTO

TOURISM

AGRI

CONS

STEELS

ETRON

PETRO


Market Talk Top Picks

Source: ASPS Research

StartDate Avg. Cost Last

CPALL 11-Nov-19 10% 0.96% 78.25 79.00 100.00 30.94 9.06 1.66

2020 profit would show the biggest growth in three years. Fee income

from services would play more significant roles. The advertising media

deal with PLANB (at 1,000 stores) would make income in 2020.

EA 29-Oct-19 15% -10.47% 47.75 42.75 56.00 26.17 6.46 0.573Q19 net profit grew 16.4%qoq (slightly better than expected), mainly

because normalized profit was driven by the wind turbine business. 4Q19 normal profit is expected to grow further and make a year's high.

LH 26-Sep-19 10% 1.01% 9.90 10.00 12.30 11.62 2.12 7.50Solid integrated property business structure (both for sales and for rent).

Strong shared profit from associates (QH, HMPRO, and LHFG).

TTCL 06-Nov-19 10% 1.41% 7.10 7.20 10.00 5.24 1.32 3.47

TTCL has backlog of B10bn that will generate revenue until 2021. Plus, it

is likely to win biddings for two new projects. The price already

underwent significant correction and has wider upside.

JWD 30-Oct-19 15% -9.57% 9.40 8.50 12.80 25.10 2.80 3.39The government grants tax exemption in EEC areas (Chonburi, Rayong, and Chachoengsao). This would encourage, accommodate, and benefit

logistic business.

STPI 08-Nov-19 10% -2.36% 6.35 6.20 8.30 5.18 1.14 7.26

STPI is expected to show 3Q19 net profit of B500-600m thanks to

compensation gain from an overseas lawsuit. STPI is expected to win

four new projects worth B2-3bn.

AMATA 24-Oct-19 10% -5.63% 25.75 24.30 35.70 14.83 1.85 2.70AMATA has over 11,000 rai of land in EEC areas (the most among

peers). Land backlog makes a new high of B3,750m.

CPN 21-Oct-19 10% 0.39% 64.00 64.25 94.00 25.04 3.99 1.80Still laggard compared with SET Index. CPN is selling leasehold rights in

five malls worth up to B48.6bn to CPNREIT.

KKP 16-Oct-19 10% 0.38% 65.50 65.75 79.50 9.19 1.27 6.84

KKP has dividend yield over 6%p.a. Core businesses for the rest of 2019

would be driven by net loan growth (mainly from high-yield loans) and

income from IB deals.

Accumulated contribution returns since beginning of the year

Accumulated returns since beginning of the year

Stocks Fair Value Strategist Comment

Accumulated returns

Accumulated returns since our recommendation

Today we decrease investment in EA by 5% and JWD by 5% but invest 10% more in POPF

WeightDividend

Yield

Accumulated

ReturnPBV 2019F

PER

2019F

Price

1.41%

1.01%

0.96%

0.39%

0.38%

-2.36%

-5.63%

-9.57%

-10.47%

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

TTCL

LH

CPALL

CPN

KKP

STPI

AMATA

JWD

EA

INTUCH, -0.14%JMT, -0.15%

QHPF, -0.16%BJC, -0.18%WORK, -0.24%BDMS, -0.24%

TU, -0.26%ERW, -0.28%

DIF, -0.34%PTTGC, -0.41%

AMATA, -0.79%MINT, -0.80%JWD, -0.85%

DCC, -1.03%EA, -1.31%

CK, -1.57%SPALI, -2.15%

BBL, -2.86%

-4% -3% -2% -1%

MCS, 3.38%TASCO, 2.43%

MAJOR, 2.14%WHA, 1.39%

MTC, 1.28%FPT, 1.15%STEC, 1.11%PTTEP, 1.10%

QH, 1.05%TFG, 1.01%PLANB, 1.00%

PTT, 0.89%BCH, 0.87%

SCC, 0.81%RS, 0.80%DRT, 0.78%

CPALL, 0.71%POPF, 0.69%LH, 0.68%

SEAFCO, 0.63%STPI, 0.62%STA, 0.60%JASIF, 0.58%

EASTW, 0.43%KKP, 0.42%M, 0.38%

TPIPP, 0.21%TTCL, 0.20%ROBINS, 0.17%THANI, 0.17%CPF, 0.16%SCCC, 0.15%

ADVANC, 0.06%CPN, 0.05%DTAC, 0.04%KBANK, 0.01%

0% 1% 2% 3% 4%

14.35%

1.51%

-1.88%

3.28%

0.85%

-0.68%-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

YTD MTD -1D

ASPS Portfolio SET Index

-5%

0%

5%

10%

15%

20%

25%

ASPS Portfolio SET Index

Equity Calendar

Research DivisionNovember 14, 2019

Monday Tuesday Wednesday Thursday Friday11 12 13 14 15

XD New listing - Tourism New listing - Energy & Utilities New listing - MAI > Property & Development XD

LHHOTEL @B0.30 S Hotel & Resort (SHR) 3,593.64m shrs, B5.00 par Absolute Clean Energy (ACE) 10,176m shrs, Boutique Corporation (BC) 507m shrs, B1 par CHAYO @B0.0027777

LHPF @B0.13 (IPO 1,437.456m shrs @B5.20) B0.50 par (IPO 1,018m shrs @B4.40) (IPO 167m shrs @B2.86) CHAYO 20 existing: 1STD @free

QHHR @B0.15

SVH @B7.00 New shares trading XD XD Conversion

PPPM 14,442 shrs (w) GLANDRT @B0.18 JASIF @B0.23 MINT-W6 1:1w @B43.00

XR TMILL @B0.08 TCAP-P 1:1

EFORL 4:1n @B0.05 XE TSTE @B0.10

NCL-W3 1.50:1w @B2.40 (final, "SP")

New shares trading

LIT 1,200 shrs (w)

RS 1,004 shrs (w)

18 19 20 21 22

Co's name change XD XD XD XD

Asian Seafoods Coldstorage (ASEAN) > HREIT @B0.19877 B-WORK @B0.188 BKI @B3.00 BGC @B0.09

Asian Sea Corporation (ASIAN) TPRIME @B0.1307 CPNREIT @B0.406 MCS @B0.25 BOFFICE @B0.1632

IMPACT @B0.20 WHA @B0.0815 BSBM @B0.04

XD XN SAAM @B0.025 WHAUP @B0.0925 INSET @B0.035

ATP30 @B0.02 TPRIME @B0.0616 MGT @B0.05

CPNCG @B0.1848 XN XR SRIPANWA @B0.2204

DIF @B0.1656 SPRIME @B0.176 MPG 4:1n @B0.18 SUTHA @B0.03

POPF @B0.1569

PPF @B0.092 Conversion XN

SIRIP @B0.10 AJA-W1 1.30972:1w @B1.527 (final) BOFFICE @B0.0081

XN

ERWPF @B0.0823

Conversion

SAMART-W2 1.014:1w @B14.80

NESDB - GDP 3Q18

25 26 27 28 29

XD XD XD Last trading date XN

AIMCG @B0.1904 BROOK @B0.02 AMATAR @B0.185 CRYSTAL CRYSTAL @b0.1313

AIMIRT @B0.1365 DCC @B0.022 ICN @B0.05

APCS @B0.10 FTREIT @B0.167 SEAFCO @B0.07 XD Conversion

BKKCP @B0.20 HPT @B0.0181 SPI @B0.20 EPG @B0.10 BTS-W4 1.011:1w @B10.384 (final)

LHK @B0.12 IVL @B0.35 TNH @B0.55 CGH-W3 1:1w @B2.00

PTL @B0.36 KAMART @B0.07 Conversion CSC-P 1:1

TFI @B0.136 LPH @B0.075 XE META-W4 1:1w @B3.50 DOD-W1 1:1w @B15.75

SHREIT @B0.0285 MILL-W3 1.099:1w @B2.732 (final, "SP") NUSA-W3 1:1w @B1.00

XR SPC @B0.60 NVD-W1 1.018:1w @B7.86

NBC 2:1n @B0.53 Conversion PACE-W3 1:1w @B0.25

NMG 3:10n @B0.06 XR CHEWA-W1 1:1w @B1.75 (final) SUPER-W4 1:1w @B2.50

CHUO 1:1n @B0.10 TCMC-W2 1:1w @B4.00 (final)

Conversion UKEM-W2 1:1w @B0.50

ECF-W3 1.008:1w @B4.9958 XN

TMB-T1 1:1T @B1.40 (final) SHREIT @B0.0657 BOT : Oct-19 Trade

Monday Tuesday Wednesday Thursday Friday2 3 4 5 6

Conversion ConversionCI-W1 1.0172:1w @B2.1628 NCL-W3 1.50:1w @B2.40 (final)

PUBLIC HOLIDAY

(H.M. the Late King Bhumibol Adulyadej's Birthday

National Day and National Farther's Day)

MOC : Nov-19 CPI

9 10 11 12 13

XD

GOLD @B0.48

PUBLIC HOLIDAY

(Constitution Day)

16 17 18 19 20

XW Conversion

BTS 10 existing: 1BTS-W5 @free MILL-W3 1.099:1w @B2.732 (final)

MPC meeting

23 24 25 26 27

30 31

PUBLIC HOLIDAY

(New Year's Eve)

BOT : Nov-19 Trade

November 2019

December 2019

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)

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