Daily Strategy for Investors on October 8, 2019

Asia Wealth Securities (AWS) has made an analysis for the trading session on October 8, 2019, pointing out some of the must-know events in the equity market as follows:

Investment Ideas:

1) Investors are not confident about the outcome of the U.S. – China trade negotiation which will be held on 10-11 October 2019.

2) China does not want to enter into a broad trade agreement as required by President Donald Trump.

3) The current expectation that the Fed may cut interest rate at this month’s meeting to stimulate the economy remains a short-term positive factor for the stock market. In the long run, it is necessary to monitor the stimulus policies of each country whether or not it could handle the weak economy.

4) SCC sees the outlook of petrochemicals industry especially key petrochemicals spread which is HDPE weakening to just USD345 per tonne in September, while the 3Q19 QTD was USD455 per tonne or -16% QoQ and -33% YoY. SCC will announce its financial statement on 28 October 2019. It is expected that there will be many more in the petrochemical-related industry that will have a bad outlook like SCC including IVL, PTTGC, IRPC, TOP and ESSO.

5) Demand for building materials, both domestic and international, is shrinking. For domestic, it is bad due to the construction of the housing sector is shrinking; while for international, it is slowing down in Myanmar, Cambodia and Vietnam.

6) For the real estate sector, the Bank of Thailand commented that LTV measures has helped the estate price to fall whereas actual real estate buyers could make a purchase. AWS sees that the BOT’s signal indicates a real economic recession from now on.

7) The index range is expected to be 1,605-1,624 points. Recommend stocks are KTC, KKP and AOT.

 

Stock & Comment

KTC – TP ฿52.00/share

KKP – TP ฿80.00/share

AOT – TP ฿84.00/share

 

Pick of the day: KTC (BUY; AWS TP Bt52.00)

AWS expects the 3Q19 net profit to revise up YoY and QoQ driven by loan growth from the approaching to high season, new hire-purchase business (Pi Berm). In addition, the group’s financial cost is expected to revise down from the expectation that the company will refinance high-interest rate debentures with new low interest-rate yield.

Currently, KTC has requested licenses of four Pico Finance business areas including Pathum Thani Province, Chonburi Province, Samut Prakan Province and Samut Sakhon Province. The new credit of all four locations is expected to start benefitting NIM of the group in the long term. It is likely to see clearer results in the middle of 2020 onwards.

KTC remains in the uptrend from the occurrence of Monthly Buy Signal. However, it is still at a short-term and medium-term base adjustment period from the occurrence of both Daily and Weekly Sell Signals.

A new Daily Buy Signal will be resumed once it could at least successfully close above Bt43.00. The next target is at Bt47.00. (Resistance: 42.00, 42.25, 42.75; Support: 41.50, 41.25, 40.75)

AWS recommends BUY with a target price of Bt52.00 based on 5.6x Prospective PBV.