Daily Strategy for Investors on October 31, 2019

Asia Wealth Securities (AWS) has made an analysis for the trading session on October 30, 2019, pointing out some of the must-know events in the equity market as follows:

 

Investment Ideas:

1) Thai stock market is expected to further revise up in response with positive news as the Fed announced to cut interest rate by 0.25% from 2.00% to 1.75% at the FOMC meeting by 8-2 votes to cut interest rates along with giving a signal to suspend interest rate cut cycle. As a result, it believes that the Fed has sufficient confident in economic condition to not cut interest rate again in the near future. AWS, therefore, looks in a better direction for the overall US and world economy.

2) The BOT held the MPC meeting on 6 November to determine the direction of the Thai policy interest rate. AWS expects BOT to cut interest rates by 0.25% from 1.50% to 1.25% at this round of meeting.

3) Chile announced the cancellation of the APEC meeting scheduled on 16-17 November 2019 amid of riots that took place in the country. As a result, investors are cautious in trading in order to see the clarity of trade negotiation between the US and China.

4) The situation benefits finance business if interest direction goes down and larger banks are more stringent in lending loans. AWS favors SAWAD, MTC, KTC and KKP.

5) In the banking sector, AWS likes SCB and KKP, which are banks that have a gradual recovery of the ROE.

6) Expect SAWAD to be included in the calculation of MSCI index in this round which will be announced on 7 November and be effective on 26 November.

7) Predict stock market has reached the rebound point. Expect today’s index range to be at 1,595 -1,615 points. Recommended stocks are SAWAD, TASCO, KTC, EPG and AMATA.

 

Stock & Comment

SAWAD – TP ฿72.00/share

TASCO – TP ฿24.00/share. In a weak regional economy, the government of each country will accelerate the disbursement of the budget for road construction to stimulate the economy.

KTC – TP ฿53.00/share. Pico Nano Finance will help driving future profit.

EPG – TP ฿9.20/share. Expects the price of plastic pellets to fall for at least 2 years, posing a positive impact on manufacturers that use good grade plastic pallets as raw materials.

AMATA – TP ฿30.50/share. Expects a bright 3Q19 performance from land sales of up to 470 rai compared to 230 rai in the first half of the year.

 

Pick of the day: SAWAD (Bt64.00; BUY; AWS TP Bt72.00)

AWS expects the 3Q19 net profit to be at Bt931mn, up 21.4%YoY and 6.5%QoQ, driven by a 25.8%YoY and 10.2%QoQ increase in interest income in line with the branch expansion strategy.

SAWAD is expected to have approximately 3,315 branches at the end of 3Q19 before expanding to 3,400 branches at the end of 2019 according to the company’s target. In addition, the cost-to-income ratio is expected to drop to 36.5% compared to 39.4% in the 2Q19 as, in the 2Q19, there was an additional one-time expense recorded of around Bt20mn.

 

In the long term, SAWAD is expected to benefit from the downtrend of interest rate, including profits from BFIT after the acquisition of additional shares in BFIT from the previous 45% to 82%. As a result, it helps increase the company’s interest rate margin (NIM) from wider room to collect interest rate.

AWS recommends BUY with a new target price in 2020 from Bt62.00 to Bt72.00 based on a 4.6x PBV. SAWAD remains very strong in a full uptrend due to the occurrence of Daily, Weekly, and Monthly Buy Signal. The first target of New High is at Bt72.25 and short-term stop loss is at Bt55.25 (Resistance: 64.75, 66.00, 68.25; Support: 62.75, 61.50, 59.25).