Daily Strategy for Investors on July 19, 2019

Asia Wealth Securities (AWS) has made an analysis for the trading session on July 19, 2019, pointing out some of the must-know events in the equity market as follows:

1) Fed is likely to cut interest rates significantly at the end of July.

2) Dubai crude oil price ending of 2Q19 was US$61.76 per barrel, lower than the end of 1Q19 at US$66.93 per barrel. At present, the price of crude oil is US$62.31 per barrel, softening 3.3% WoW. AWS expects the market to reap impact from oil price slide.

3) SCB announced better performance than consensus estimates of 6%. While BBL has a better than expected of 3%, KTC has a 5% lower than forecast. Lastly, KBANK has a lower by 2%. Considering the announcement of financial results, those were not too bad, resulting in relieving the market concern.

4) The petrochemical group is expected to have weak 2Q19 earnings, especially IVL with a net profit of only Bt3.2bn, much lower than the average quarterly earnings of around Bt5.0bn and good quarterly earnings of Bt10.0bn per quarter. AWS revised IVL’s target price down from Bt55.00 baht to Bt50.00.

5) JKN business is still bright and dynamic all the time. Suggest finding an opportunity to buy at the price below Bt9.00. While AWS’ target is Bt11.00.

6) AWS adjusted PSL’s target price from Bt10.50 to Bt13.00. Baltic Dry Index has risen to 2,130 points, up 66%YTD. AWS expects significant earnings growth in 2H19

7) AWS expects today’ SET index range at 1,720 -1,735 points. Recommend PSL, JKN, EPG, SCB.

 

Pick of the day: PSL (Bt9.00; BUY; AWS TP Bt13.00)
The latest freight rate increased to 2,130 points, +66 points or +3.20%, and up 66% YTD, while the average in 3Q19 was up to 1,750 points or up 76% QoQ. This is because the supply of vessels in 2020 will disappear by more than 20% of the IMO2020 measures that govern the use of low-sulfur-controlled boat fuel. This is also coupled with a low freight rate causing no building of new ships for quite a long period of time

AWS adjusted the average freight rate for 2019 and 2020 from 1,400 points per year to 1,425 points and 1,800 points, respectively. As a result, revenue from the freight and net profit from PSL’s shipping business in 2019-2020 has increased by 27% and 164%, respectively. AWS, therefore, revised our target price up from Bt10.50 to Bt13.00 and adjust recommendation to “BUY”

PSL is strong both in the short and medium terms from the occurrence of Daily & Weekly Buy Signal. If PSL could close above Bt8.30 at the monthly market, a new Monthly Buy Signal will resume. This is quite possible. The return of new Monthly Buy Signal will make PSL to be in a full uptrend immediately. PSL has the first target at Bt10.70 and Bt14.40, respectively. Short-term stop loss point is at Bt8.40. (Resistance: 9.10, 9.25, 9.55; Support: 8.85, 8.70, 8.40)

 

Foreign Market
US stock market : Dow was +3.12 points or + 0.01%, while S&P500 was +10.69 points or +0.36%, and Nasdaq +22.04 points or + 0.27% as investors responded to Mr. John Williams, Chairman of the Federal Reserve (Fed) New York branch, who came out to support the Fed to lower down interest rate. This factor is enabling the market to rebound after falling in the first period due to concern on the performance of listed companies including NetFlix.

 

Commodities
Crude oil price: WTI for August delivery fell USD1.48, or 2.6%, to close at USD55.30/barrel which is the lowest since 19 June 2019. Brent for September delivery fell USD1.73, or 2.7%, to close at USD61.93/barrel which is the lowest since 19 June 2019. The market was pressured by lower-than-expected US crude inventory figures last week. That concern is pulling the price of crude down to reach a one-month low and has overshadowed a positive factor from the news report that Iran seized oil tankers in the Hormuz Strait.

The BDI index closed on the latest business day at 2,130.00 points which is up by 66.00 points or +3.20%. It benefits PSL and TTA continually.