Daily Strategy for Investors on January 28, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on January 28, 2020, indicating the essential events in the stock market as follows:

Investment Ideas:

The Thai stock market is still at risk from the coronavirus outbreak, including affecting the overall economy and tourism overview. The Tourism Authority of Thailand estimated that if the situation takes  3 months, the tourism revenue will be affected at around Bt100bn while the University of the Thai Chamber of Commerce estimated that the said event will affect Thai GDP in 2020 by about 0.5% – 0.7% (IMF expected Thai GDP in 2020 to be 3.0%).

Follow the FOMC meeting between 28-29 January, AWS expects the Fed to maintain the policy rate unchanged at 1.5% – 1.75%, with the FedWatch weighing 87.3% of the possibility that the rate will be maintained, including meetings during March and April, there is still a possibility of up to 77.4% and 68.8% to continuously maintain interest rates.

Draft Budget Act 2020, follow up on the decision of the Constitutional Court on 29 January. Procedure of the Constitutional Court (1) If not considering the 2020 Budget Act, there will be effective (expected not later than March 2020) and (2) if considered (the court has the right to open an investigation or not) in the case that the 2020 Budget Act is approved by the Constitution, the 2020 Budget Act is applicable. In the case that the Budget Act 2020 is not approved by the Constitution, it must see the opinion of the court that it will be void (go back to start a new process) or vote again on some sections (may be delayed until mid-2020).

Thai baht continued to depreciate. This morning, it was at Bt30.72 per USD, which is a supporting factor for theme investment regarding the depreciation of Thai baht.

Investment theme – (1) Accelerate disbursement of the government budget in 2020. AWS chooses CK (TP Bt22.00), SEAFCO (TP Bt7.30), CPALL (TP Bt94.00), KKP (TP Bt80.00) (2) Government stimulus measures, AOT (TP Bt84.00), CPALL (TP Bt94.00) and HMPRO (TP Bt19.00) (4) Global trade has eased and Thai baht depreciates. AWS chooses HANA (TP Bt39.00), TU (TP Bt18.40) and CPF (TP Bt33.00) and (3) High dividend yield and defensive stock. We choose KKP (TP Bt80.00) and GPSC (TP Bt97.00).   

AWS expects the SET to be within the frame of 1,513-1,530 points (Support: 1,513, 1,502 and 1,484 points / Resistance: 1,530, 1,541 and 1,559 points).  

Stock & Comment

CHG AWS TP Bt2.80

TU  AWS TP Bt18.40

HANA AWS TP Bt39.00

Pick of the day: CHG (HOLD; AWS TP Bt2.80)

Form the opening of Chularat 304 Inter Hospital (CH304) in the 2Q18 and Ruampat Chachoengsao Hospital (RPC) in the 3Q18, AWS expects CH304 and RPC to reach a break-even point in the 4Q19 and 1Q20 respectively. As a result, the company will experience less loss from the opening of both new hospitals.

As the Social Security Office has revised up medical fees in 2020 by approximately 10% from the previous rate, we still have a positive view on CHG.

Even though the Social Security Office has revised down the rate of high cost medical in-patient services (AdjRW  2) from Bt12,800/AdjRW to Bt7,100/AdjRW, AWS expects the 4Q19 net profit to grow by 48%YoY from the opening of CH304 and RPC. However, it has revised down 39%QoQ as the 3rd quarter is a high season of hospital business. The 4Q19 gross profit margin is expected to be 28.0% compared with 34.6% in the 3Q18 and 28.1% in the 4Q18.  

Rollover to the FY2020 target price of Bt2.80 based on DCF (6.28% WACC and 1.5% Terminal growth rate)

Weekly outlook: The price forms itself to a Double Bottom pattern and is going up to test the resistance at Bt2.86. Daily outlook: the price has a buying signal with higher trading value. AWS sees the price facing profit taking in the zone of Bt2.76-2.80 but expecting to stand above the support level of Bt2.70. AWS recommends gradually accepting. The stop-loss point is set at Bt2.60 (Resistance: 2.82 / 2.86; Support: 2.70 / 2.66).