Daily Strategy for Investors on August 20, 2019

Asia Wealth Securities (AWS) has made an analysis for the trading session on August 20, 2019, pointing out some of the must-know events in the equity market as follows:

1) World market has a positive factor by China and Germany preparing to stimulate the economy.

2) Trump president posted on tweeted a request for FED cut interest rate 1% and revived the bond-buying program following quantitative easing (QE). Previously, Trump displeased with the Fed chairman who did not show to cut interest rate further after reducing one time on 30-31 Jul 2019.

3) Treasury bond yield rebounded, resulting investor relieve anxiety about the economic recession.

4) Crude oil prices closed up and the latest freight charge at 2,067 points, down 21 points or -1.01%.

5) The outlook of construction sector is negative  due to new government change. The bidding for the larger projects such as western orange line has been postponed so it may be affected to the deadline for Eastern Orange line so AWS recommends wait to see the clear situation.

6) Expect downtrend of Petrochemical Sector take time about two years due to new a lot of supply include PE, PP and Paraxylene, Benzene. Suggesting avoid to investment this sector including PTTGC and IVL.

7) Expect index trading range 1,630-1,650 points. Recommend stock EPG (TP ฿7.50), ORI (TP ฿11.50 from impressive 2Q performance), CPALL (TP ฿94 benefits from stimulus plan).

 

Pick of the day: Recommend “BUY” EPG with a target price at ฿7.50/share

EPG reported the 1Q19 /20 net profit of Bt215mn (-29%YoY, +93%QoQ) as expected. Gross profit margin improved QoQ both in AEROFLEX (construction materials), AEROKLAS (automotive) and EPP (packaging) businesses. The main reason was from a continued decline of price of plastic pellets which are important raw materials for production. The price of plastic resin is likely to be in the downward trend for around two years.

The HDPE will have 1.6  million tonnes of new supplies ready to enter the market sooner in 2H19 than previous schedule in 1H20, while the packaging business starts to pick up from more consuming of beverages in a year with hot weather and lot of holidays.

Meanwhile, major customers, such as 7-11 , are developing more ready-to-eat products coupled with a current widespread trend of Food Delivery Services. They all are factors, driving packaging business of EPG to grow.

The management sets a growth target of 20%YoY. Packaging business is likely to improve in 2019 , while AEROFER and AEROKLAS business has launched new product to boost sales. Recommend BUY with a target price of Bt7.50 based on an 1 8.8 x PER in 2019/2020.

EPG’s main trend is in the downtrend from the occurrence of Daily & Monthly Sell Signal. Currently, EPG has only a medium-term strength from the occurrence of Weekly Buy Signal. EPG will resume a short-term strength from a new Daily Buy Signal, once it could at least close above Bt6.65. EPG has the first target at Bt7.50 and a preliminary target of Bt9, respectively (Resistance: 6.40 , 6.45 , 6.50 ; Support: 6.30 , 6.25 , 6.20).