Daily Strategy for Investors on January 16, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on January 16, 2020, indicating the essential events in the stock market as follows:

 

Investment Ideas:

The US and China formally signed the first phase of trade agreement which states that China will order more products and services from the US, while the US agreed to lower tariffs on imported goods from China.  

The US will lower tariff by half from the 15% imposition on Chinese imported goods at the amount of $120bn and delay the additional tax collection as well as buy goods and services from the US by another $200bn in the next 2 years. The US is expected that its trade deficit will revise down.

For hospital business sector, negative factors have lessened and get better. The Social Security Office agreed to revise up medical service fees in 2020 to the contracted hospitals in social security system by approximately 10% from the original rate. As a result, it benefits BCH (AWS TP ฿20.60) and CHG (AWS TP ฿2.80).

Performance of commercial banking sector are gradually announced. The 2020 business assessment is expected to have a similar view in every bank which is Thai economy in 2020 is weak. TISCO is the first case (HOLD; AWS TP ฿112).

Crude oil price revised down by 1%. WTI fell below $58.00.

Investment theme: Selective. It needs to be cautious with the sensitivity of commodity stocks, especially refinery and petrochemical stocks. Most recently, AWS gives investment weight as Underweight.

Today’s index range is 1,570 -1,600 points.  

 

Stock & Comment

BCH   – TP ฿20.60
LH    – TP ฿11.50
CK    – TP ฿22.00

 

Pick of the day: BCH (BUY; AWS TP ฿20.60)   

The Social Security Office agreed to adjust medical service fees in 2020 to the contracting hospitals in social security system as follows: (1) per capita fee is ฿1,640 per person per year or up by 9% from the original rate, (2) IPD for diseases with high cost (AdjRW 2) is at ฿746 per person per year or up by 17% from the original rate and (3) OPD chronic diseases is at ฿453 per person per year or up by 1% from the original rate. It is totaling of ฿2,839 per person per year or up by 10% from the original rate.

From the above factors, it poses a positive impact on BCH as BCH has a proportion of social security revenue in the 9M19 which is 33% of total gross revenue. Initially, AWS expects net profit to revise up by 4-5% from the previous estimate

In addition, BCH has a total of 8.7 hundred thousand insurers in the 3Q19 and the company expects the number of insurers to grow 5-6%YoY in 2020.

Recommend “BUY” with a target price of ฿20.60 based on DCF method (7.0% WACC).

Weekly outlook: the price is sideway at the range of ฿15-18.00. Daily outlook : the price has revised up to close the gap at ฿16.30. Although yesterday the price opened at ฿16.40 but it did not pass the 200-day average and was sold for a profit and closed above the 5-day average of ฿16.00. If the price did not fall below ฿15.80, it is expected to test the 200-day average again. Stop loss is set at ฿15.50 (Resistance: 16.30, 16.60; Support: 15.80, 15.60).