DBS Vickers Recommends Value Stocks, Top Pick: KBANK, ROJNA, SC

DBS Vickers Securities (DBSVS) forecasts the SET Index to trade between 1,590 and 1,630 points this week, recommending investors to accumulate value stocks including KBANK, ROJNA, and SC.

Even though a decline in the US VIX Index, also known as the fear index, combined with American banks beginning their third quarter earnings on a positive note, have weighed positively on the Thai market this week, the SET remains overshadowed by China’s slowing economy.

China’s GDP grew 4.9% in 3Q21, slower than the 7.9% expansion reported in the previous quarter, as the country struggles with economic slowdown brought on by Evergrande debt, energy shortage, and a spike in law material prices, etc.

Whereas widespread flooding in Thailand continues to hamper the economic recovery, when the water recedes, stocks related to construction materials such as cement, tile, and asphalt will benefit.

DBSVS believes KCE, HANA, HFT and TU will benefit from the weak baht.

Even if the country’s reopening could lead to an increase in daily COVID-19 cases and tourist arrivals may fall short of expectations. However, the government believes that opening the border will give rise to more economic benefits. The  first group of international visitors is expected to include business travelers, high-end foreign tourists, and patients from neighboring countries.

– KBANK (TP: 195 baht) – earnings are expected to grow 20% YoY in 3Q21, while full-year earnings are expected to grow by double digits. DBSVS sees an upside risk to the 2022 outlook from the continued reduction of contributions to the FIDF from 0.46% to 0.23% of the deposit.

Yesterday (October 19), KBANK subsidiary KBTG launched KASIKORN X (KX), a new platform based on the concept of KX & Coral Experience the World of DeFi and Beyond. DeFi is a Blockchain and Smart Contract technology that eliminates the need for financial transactions to be mediated by a third party.

– ROJNA (TP: 7.64 baht – does not include hemp business value) – the company has set aside 250 million baht for phase one of the CBD manufacturing plant. The project is expected to be completed within the next year.

ROJNA acquired a 51% stake in Herb Treasure with the intention of planting 100 rai of hemp and extracting CBD with a capacity of 9,000 tons per year. The company expects to gain annual revenue of approximately 1 billion baht. Meanwhile, the industrial estate business will improve once the country’s reopening, and the electricity business will continue to generate a healthy cash flow.

– SC (TP: 3.80 baht) – due to the high demand for low-rise housing during the COVID outbreak, SC’s earnings in 2021 are expected to be healthy and to continue growing in 2022. Additionally, SC maintains a sound financial position and pays a high dividend yield of approximately 6-7% per year.