Daily Strategy for Investors on April 9, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on April 9, 2019, stating that SET on Friday swung in a narrow range driven by buying pressure domestic plays stocks led by BEM, SCB, KBANK, KTC and CPALL.

The index closed at 1,646.1 points (+1.9 points) with a trading value of THB 26 billion, (THB 34 billion the previous day). Foreign investors net sold Thai shares by THB 438 million, institutional investors net sold by THB 762 million. There were net long on SET50 index future by 7,613 contracts.

 

Investment Theme: SET to swing ahead of Songkran festival/ New labour protection act kicks off
The law, officially called the Labour Protection Act, was published in the Royal Gazette on Friday after the National Legislative Assembly passed it on Dec 13. One noteworthy change is the addition of another rate to the termination compensation structure. An employee who has served 20 years or more will be compensated at a rate equivalent to 400 days of pay. In terms of accountancy, the listed companies are required to record it as expenses in the income statement. Some have recorded it in 4Q18 such as CPALL which gradually recorded about THB 100 million and the rest THB 800 million will be recorded later.

Overall, Maybank expects this to affect the EPS of the SET by about THB 30 billion. This item is forecast to be recorded in 1Q-2Q19, led by CPF of THB1.8b, TU THB 200-250 million, SCC THB 2.5 billion. Divided by sectors, the construction and food sectors will see a high ratio of these expenses to net profit by about 7.5-8.0% while the energy and banking sectors will see a ratio of 2-4%.

In summary, Maybank may see the SET EPS19 to be cut down to less than 110x, which affects the upside. However, Maybank recommends investors focus on earnings growth.

 

April Investment Theme
The SET in April should swing in the uptrend channel with a range of 1,630-1,680 points. Recommend investors holding cash not less than 40%. BUY global plays stocks like PTTEP, BCP and HOLD BEM and CPALL.

 

Big Issue
1) Britain’s Theresa May asks EU to delay Brexit until June 30.
2) German Institute Cuts GDP Growth Forecast In Half To 0.8%
3) The Tourism Authority of Thailand to consider the extension of the visa-on-arrival fee waiver.
4) Brent continue soaring to USD71.2/barrel.

Stock Pick & Trading Idea
1) Trading Buy PTTEP with a target price of ฿150/share. Another THB 8 upside from Murphy. EBITDA is expected to grow by 15% in 2020. While crude oil prices rise after OPEC reports the lowest production in 4 years at 30.3m bbl last month. And the recent US boycott of Venezuela oil companies (Producing the lowest in 16 years at 740b bbl) and Iran is a short-term catalyst.
2) Gradually accumulate stocks with 2 themes; sector expected to face limited impact from political factors led by retail BJC with a target price of ฿65.00/share and tourism SPA with a target price of ฿15.80/share and sectors with limited downside, recovering margin with attractive valuation led by BCP with a target price of ฿39.00/share and BCH at ฿20.00/share.

 

Technical View
The SET index swung in a narrow range driven by strong buying pressure on ICT and leasing. But the selling pressure was seen on the energy and electronics sectors. If the index weakens but manages to hold, Maybank still believes it is forming the right shoulder of the reversal H&S pattern. So, if the index continues weakening, accumulate stocks at the supports 1640 and 1630. If it rebounds, take profit for the next trading cycle at the resistance 1656 as previously recommended.

Investment Strategy:
1) Investors with stocks, if rebounds intraday, consider selling pressure at resistance. If it dips below 1630, stop loss or lock profit.
2) Without stocks, gradually buy stocks if weakens intraday to supports 1640 and 1630 for a rebound trading at 1650 and 1656.

 

Maybank sets a support line at 1630 points and 1640 points, while setting a resistance line at  1656 points and 1675 points.

 

Keep an Eye on
1) The EC to unveil formula to calculate party-list MP.