Daily Strategy for Investors on January 22, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on January 22, 2020, indicating the essential events in the stock market as follows:

 

Investment Ideas:

Concerns about pneumonia caused by a new strain of the corona virus which has been known in the past for serious acute respiratory illnesses (SARs: 7 people found in Thailand in 2003) and viral respiratory infections (MERs: 3 people found in Thailand during 2017). The number of foreign tourists in 2003 was 10 million, down by 7.4%YoY and the number of foreign tourists in 2017 was 35.4 million, up by 8.7%YoY.

Aviation and tourism-related stocks yesterday (21 Jan) dropped especially ERW (-9.6%), MINT (-5.0%) and CENTEL (-6.3%) and aviation-related groups such as AAV (-3.4%), BA (-3.1%), THAI (-3.0%) and AOT (-3.0%). However, AOT is one of AWS’s theme investments that will be least affected. AWS believes that the stock price decline is a good time for investment.  

Banning of single use plastic in China by 2025, AWS sees that it will not much impact on PTTGC because PTTGC has sales revenue only 5% – 7% of total revenue in China. After talking with PTTGC, the company plans to cancel producing in 2022. Investment strategy, although yesterday’s share price (21 Jan) fell by more than 9%, PTTGC still has a negative factor due to the 4Q19 earnings outlook falling both QoQ and YoY. Therefore, AWS only recommends short-term speculation. (PTTGC will announce financial statement on 17 Feb 2020)

Banking sector’s results (1) BBL reported lower -than-expected net profit of Bt35.8bn, up by 1.4%YoY, resulting in 4Q19 net profit of Bt8bn, down by 1.2%YoY and down by 15.2%QoQ due to high reserve and (2) KTB reported a slightly better-than-expected net profit of Bt29bn in 2019, up by 2.8%YoY due to higher-than-expected gain from sales of investments and reduced credit costs.

KBANK and SCB are interesting after the sharp decline in share price, but the profit in 2020 is likely to grow

 

Investment theme: (1) Accelerate government budget disbursement in 2020, AWS chooses CK (TP Bt37.00), SEAFCO (TP Bt7.30), CPALL (TP Bt94.00) and KKP (TP Bt88.00) (2) Government  stimulus measures , recommends AOT (TP Bt84.00) CPALL (TP Bt94.00) and HMPRO (TP Bt19.00)

AWS expects the SET to be within the range of 1,565-1,584 points (Support 1,570 1,565 and 1,555 points/ Resistance 1,578 1,584 and 1,593 points)

 

Stock & Comment

CPF  – TP Bt33.00

BJC   – TP Bt54.00

STA   – TP Bt11.25

TASCO – TP Bt26.00

 

Pick of the day: CPF (HOLD; AWS TP Bt33.00) 

CPP (CPF holds 52.24% directly and indirectly), currently listed on the Hong Kong Stock Exchange, revealed that there is a positive profit. The company expects CPP’s net profit to be around USD330-350 mn in 2019 , compared to USD 282 mn in 2018 , up by 17%YoY due to the swine price in Vietnam has significantly increased in 4Q19 , resulting in an increase in  profit margins of the Vietnam farming business and a significant positive net change in fair value of biological assets in the 4Q19.

AWS expects CPF’s 4Q19 net profit to be at Bt 3.5 bn, up by 108%YoY (excluding special gains and gains from biological asset changes), according to data disclosed by the company that the profits from biological asset changes are positive. As a result, the net profit will be higher than the expectations due to the continuously rising swine prices in Vietnam. The swine price in Vietnam in Nov 2019  (data from CPF) is at 64 ,650 dong per kilogram. Although, the average price of pork and chicken in 4Q19 in Thailand dropped by 8%QoQ and decreased by 3%QoQ respectively, but in December 2019 , the price of pork and chicken in Thailand began to recover.

Swine prices are likely to increase due to the drought as pigs are animals that like water. Dehydration causes the pig to grow slowly and rising costs is a factor driving high pig prices.   

AWS recommends holding with the target price of 2020 at Bt33.00 based on the average 5-year PER of 15x.

After AWS introduced CPF last week, the daily image continues to stick to the 5-day average line, while the turnover remains high. AWS sees the price might stand above Bt30.00 and gradually increase. The stop loss is set at Bt27.50 (Resistance: 33.50; Support: 29.75 / 28.50).