Daily Strategy for Investors on September 19, 2019

Asia Wealth Securities (AWS) has made an analysis for the trading session on September 18, 2019, pointing out some of the must-know events in the equity market as follows:

 

Factors needed to be monitored:

1) The Federal Reserve (Fed) cut interest rate at the meeting as the market had expected. The Fed did not give any clear signal on the future interest rate cut.

2) Energy and petrochemical prices fell sharply yesterday as 1) crude oil price was pressured by the report that the oil production of Saudi Arabia will resume to the normal level by the end of this month. 2) Expect the 3Q19 performance not to come out brightly especially petrochemical 3) Stock price has very limited upside in responding with news on the rebound of the oil price by more than 10% at the beginning of the week.

3) Crude oil price today plunges around 2% from the news that the US crude inventory has revised up in contrast with analysts had predicted to fall. It was down for the 2nd day after skyrocketing.

4) The commercial bank sector received both positive and negative factors from IFRS9. The positive factor is the ability to recognize revenue from NPL debt collection as well as being able to reverse the excess reserves. The negative factor is the reformation of new debtors which may result in more provisioning. However, AWS sees there are more positive factors than negative ones with 60%: 40% weight.

 

Investment Ideas:

1) Energy sector is expected to not recover. If one chooses trading, it is better to wait to buy PTTEP at Bt122.00 and make a profit at around Bt128.00.

2) Banking stock is expected to resume to perform from positive news including (1) stocks in the low PBV zone, pick to invest in BBL (0.8x), KBANK (1.0x), but to speculate KTB (0.8x) and TMB (0.8x), which (2) receive positive results, therefore, they do not need to set aside the reserve as much since the 4Q19.

3) Today index range is expected to be 1,640-1,665 points. Recommended stocks are SCB, PLANB and AOT.

 

Stock & Comment
SCB – TP ฿159.00/share
PLANB – IAA Consensus TP ฿9.35/share
AOT – TP ฿84.00/share
KBANK – TP ฿240.00/share

 

Pick of the day: SCB (BUY; AWS TP Bt159.00)

1) The commercial banking sector has received a positive factor from the reverse of excess reserves. SCB also has excess reserves that can be reversed up to Bt47bn.

2) Expected the 2H19 net profit of SCB to be better than that of the 1H19 driven by higher commission revenue after selling SCBLIFE to FWD. AWS expects a revenue from access fee to be around Bt1.5bn per year.

3) Waiting to record the extra income from sales of SCBLIFE at the amount of Bt9.2bn at the end of 2019.

4) Expect the company to pay a high-level dividend of Bt6.00 per share, representing a 5% yield per year.

5) Currently, SCB is trading at a low PBV at 1.04 x (the lowest is 1.00 x as of 9 September 2019) which is lower than the average of commercial banks at 1.10 x. AWS looks at it as an interesting point to invest.

Thus, AWS recommends BUY with a target price of FY 2020 at Bt159.00 based on 1.25x PBV. Although SCB is in the downtrend from the occurrence of Weekly and Monthly Sell Signal, AWS starts to see a short-term strength from the occurrence of a new Daily Buy Signal. When considering SCB, its first target is at Bt132.50 and a primary target is at Bt145.00, respectively. SCB’s short-term stop-loss point is at Bt115.00 (Resistance: 121.00 , 122.00 , 124.00 ; Support: 119.50 , 118.50 , 116.50)