20140307-Maybank_KERPL-Thai_Market_Compass_13页_645kb

Thai Market Compass Summary

Core Content

The document provides an analysis of the Thai stock market, specifically focusing on the performance of the SET50 and SET100 indices in the fourth quarter of 2013 and the full year of 2013. It also discusses the broader economic context, including GDP growth and sector-specific performance, and outlines investment recommendations for 1Q14.

Key Points

Earnings Performance

• SET50 Earnings: Contracted by 5.6% YoY in 4Q13 and grew by 1% YoY for the full year 2013.
• SET100 Earnings: Contracted by 3.9% YoY in 4Q13 and grew by 3% YoY for the full year 2013.
• Earnings Downgrades: The growth in earnings was significantly weaker than the broader economy, especially for large-cap companies in the SET50.
• Sector Performance in 4Q13:
  • Top 3: Food (+103% YoY), Industrial Estates (+75.2% YoY), and Electronics (+98.7% YoY).
• Sector Performance in 2013:
  • Top 3: Construction Services (+205.3% YoY), Finance & Securities (+173.7% YoY), and Agribusiness (+133.5% YoY).

Economic Context

• GDP Growth:
  • 4Q13 nominal GDP grew 2.2% YoY and 2.3% YoY for 2013.
  • Seasonally adjusted GDP growth was 1.8% YoY in 4Q13 and 4.5% YoY for 2013.
  • Real GDP growth was 0.6% in 4Q13 and 2.9% YoY for 2013.
• Economic Slowdown:
  • The downward economic momentum has started.
  • GDP growth estimates have been revised down to 2.5–2.8%.
  • Weak exports in Jan-14 (contracted 1.98% YoY in USD terms) and a weak THB (depreciated 9.9% YoY vs USD) indicate a challenging economic outlook.

Market Valuation and Outlook

• SET Index Valuation: At 12.7x 2014 PE, the SET Index is 11% below the LTM (Last Twelve Months) level.
• Short-term Profit Taking: The SET Index has rebounded 12% from its Jan-14 low, making it ripe for short-term profit taking.
• EPS Forecast:
  • The 2014 EPS consensus has been revised down from THB120 to THB106, indicating a 12% cumulative downgrade.
  • Actual EPS growth in 2013 was 8.2% YoY, much lower than the initial 27% YoY forecast.

Investment Recommendations

The analyst recommends staying on the sidelines but suggests potential short-term trading opportunities based on resilient earnings outlook and good yield support.

Top Picks (Buy)

• HEMRAJ: Pre-sale driven, yield, growth
• STPI: Visible, growth
• SPALI: Visible, valuation
• LH: Value, asset-carve-out gains
• PTTEP: Crude play, currency
• ADVANC: Resilient, yield
• AOT: Resilient, monopoly
• SCC: ASEAN play, petrochem
• BEC: Resilient
• DCC: Yield

Sell Recommendations

• TUF: Growth
• AOT: Resilient

Vulnerable Sectors

• Banks: Sensitive to loan growth decline; TMB and BAY are the most vulnerable.
• Construction Services: Reliant on government projects; risk of liquidity squeeze due to high leverage.
• Commerce: SSSG (Same Store Sales Growth) has decelerated; too optimistic to expect over 15% growth.
• Property Developers: Especially large residential developers, face earnings risks due to unsecured revenue slippage.
• Automotive: Domestic car sales are weak; potential production target revisions in mid-2014.

Summary of Market Outlook

• The SET is at risk of 1Q14 earnings downgrades.
• The market may be capped at 12.7x 2014 PE or +1SD > LTM.
• Short-term profit taking is expected due to the rebound from the Jan-14 low and the weak earnings outlook.
• The analyst remains cautious and recommends focusing on stocks with a positive outlook for at least 1H14.

Analyst Information

• Maria Lapiz, Head of Institutional Research, Maybank Kim Eng.
• Contact: (662) 257 0520 | Maria.l@maybank-ke.co.th

Research Offices

• Regional Research Offices in various locations, including Thailand, Malaysia, Singapore, Indonesia, Philippines, and India.
• Contact details provided for each office and respective research teams.

Conclusion

The document highlights the underperformance of the SET50 compared to the broader economy and suggests that the market is vulnerable to further earnings downgrades in 1Q14. It emphasizes the need for caution and suggests specific stocks for short-term trading based on resilience, growth, and yield potential.