Daily Strategy for Investors on December 19, 2019

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

 

Investment Ideas:

1) The result of yesterday’s MPC meeting is to maintain the policy interest rate at 1.25%. However, AWS expects the next round of MPC meeting on 5 February 2020 is likely to revise down the policy interest rate by 0.25%.

2) The latest inflation rate in November 2019 stood at 0.21%, while the 11M19 inflation rate was at 0.69%. It is expected that for the entire 2019, Thai inflation will be within 0.70% which is very low.

3) The US House of Representatives voted to remove President Donald Trump on charges of abusing power. However, it must first receive a resolution from the Senate while the majority in the Senate is Republicans which is Trump’s side. It is expected that the impeachment of Trump will not pass the Senate. This issue is not much significant to the Thai stock market.

4) It is expected that England can proceed with Brexit within 31 January 2020.

5) SET announces VGI to enter SET50 in the 1H20, while BGC, STPI, THG, TQM and VGI enter SET100.

6) PTT said it has to pay according to the Civil Court judgment of approximately Bt4.65bn in case of disputes under the natural gas pipeline project agreement. AWS sees that this issue is not beyond the market expectation and the said value is in line with PTT’s previous concern. The impact is low at only Bt0.16 per share. It is expected that it will not have much impact on profits and dividends and is considered to have finished one of the Overhang issues. Recommend “BUY” with a target price of Bt52.00.

7) Today’s index range is expected to be 1,550 -1,573 points. Recommend stocks are BBL, VGI, PLANB, ADVANC and BANPU .

 

Stock & Comment
BBL – TP ฿223.00/share
VGI – IAA Consensus ฿10.30/share
PLANB – IAA Consensus ฿10.50/share
ADVANC – TP ฿250.00/share
BANPU – TP ฿14.50/share

 

Pick of the day: BBL (BUY; AWS TP Bt223.00)

AWC has a positive view on BBL’s acquisition of Permata Bank Indonesia after listening to the management’s statement. AWS sees it as a better opportunity in addition to the overall picture of Indonesian economy with an average GDP growth of 5% per year over the next 10 years (2019-2028).

Indonesian economy will revise up from the current level of USD1.1tn to USD1.7tn. The 100% acquisition of Permata requires a total investment of Bt91.00bn. However, after the merger, several financial ratios will improve such as the Net interest margin (NIM) which will increase from BBL only at 2.4% to 2.5% or +15 bps, Cost-to-income ratio which will increase from 43.3% to 45.4% or +212 bps, Credit Cost which will decrease by 2 bps to 1.0%, NPL ratio which will decrease 3 bps from 3.6% while this merger is expected to immediately add EPS and ROE to BBL in 2020. The deal is expected to be completed in the 3Q20. AWS maintains the recommendation “BUY” with a target price of Bt223.00.