Daily Strategy for Investors on October 24, 2019

Kasikorn Securities (KS) has made an analysis for the trading session on October 24, 2019, stating the must-know events in the equity market and things to focus as follows:

 

China is to grant tariff waivers to some companies to buy US soybeans. CP is to sign the high-speed train contract today. The SET Index is expected to recover further today to 1,620-1,640 pts.

Hong Kong has withdrawn a controversial extradition bill and denied Hong Kong’s Chief Executive Carrie Lam would be removed as protestors demanded. The situation should be monitored closely. China announced it will give tariff waivers for some companies to buy US soybeans (expect around 10mn tons), a good sign before the meeting between Trump and Xi Jinping in Chile on Nov 16-17. Oil prices rebounded on a higher-than-expected drop of oil inventories on expectations OPEC will cut production capacity at the Dec meeting.

 

SET Index to rebound to 1,620-1,640 pts.
KS expects the SET to rebound to 1,620-1,640 pts on progress in the US-China Phase 1 trade deal. Higher oil prices will also support ENERG and PETRO. Contractor and IE companies will be supported by the signing of the high-speed train contract. The 2 nd and 3 rd readings of the fiscal 2020 budget should be approved in early Jan 2020, kicking off more Bt100bn in project bidding next year.

 

Top picks: CK (closed Bt23.40/TP Bt34.50)
KS expects more projects to be put up for bid in the future. CP will sign the high-speed train contract on Oct 24, which will drive up its backlog by Bt50-60bn (from Bt38bn). RBF (closed Bt3.30/TP Bt4.52). The company is the third-largest R&D leader in the industry. KS expects net profit to grow by a 13% CAGR in 2019-2021 driven by capacity expansion in Vietnam and Indonesia in 2020. KS’ TP implies a 2020 PER of 21x (EPS Bt0.21), in line with the industry but cheaper than the first and second-largest players (25-35x).

 

Investment strategy: Focus on stocks with positive catalysts, robust 2H19 prospects.

1) Stocks that will benefit from government measures: CPALL, BTS, ORI, TFFIF, STEC;

2) Dividend plays: JASIF, TISCO, LH, TCAP;

3) ICT plays that will benefit from less competition (more revenue, lower costs): TRUE, DTAC, ADVANC, INTUCH;

4) Stocks that will benefit from IMO 2020: TOP, PRM, BGC, TASCO;

5) Stocks that will benefit from a recovery of Chinese tourists: AOT, ERW, MINT, CENTEL; and

6) Stocks with specific catalysts: CPF, GUNKUL, TPCH, JAS, OSP, TKN, MEGA, TU, GFPT, BDMS, IVL.

 

TAT reported tourists in Sept expanded by 10% YoY, of which Chinese tourists jumped 32% YoY and Indian tourists increased 27% YoY, in line with KS’ forecast. KS has a Neutral view of the tourism sector and prefer AOT. In 3Q19, hotel RevPar declined at a slower pace and should turn positive in 4Q19.

Key economic factors: EU October PMI manufacturing (expected at 46.0 points), ECB meeting (expected to maintain a -0.50% rate), US October PMI manufacturing (expected at 50.3 points), PMI service (expected at 50.9), September durable goods orders (expected at -0.7% Mom) on Thursday. Thursday.