KSS

Krungsri Securities (KSS) has made an analysis for the trading session on July 30, 2019, stating that the SET Index tumbled 13 points (-0.8%) and closed at 1,718 in THB 59 billion turnovers on July 26, 2019. The SET fell along with regional markets as investors took profit before the FOMC meeting next week. The SET was also pressured by sell-on-fact activity in stocks that reported disappointing results. Foreign investors returned as net sellers of Thai stocks at THB 4,347 million and sold net THB 251 million worth of Thai bonds but Net Long TFEX at 5,037 contracts. Market Outlook: KSS have a neutral view on the market today, expecting the SET Index to move within 1,710 - 1,725 pending the FOMC meeting on 30-31 July where the Fed is expected to cut the policy rate by 0.25% to 2.25% to boost the economy. Investors will be monitoring the Fed's comments for hints on economic and interest rate directions. The other major meeting would be between the US and China, which main topics would be intellectual property, tech transfer, trade barriers (apart from tariffs), agriculture, services, trade balance and law. KSS continues to recommend a Selective Buy strategy with a focus on impressive results. Investment Strategy: Selective Buy Stocks tend to post impressive 2Q19 earnings (EA, BGRIM, GPSC, CKP, TU, GFPT, TFG, CPALL, MTC, THANI, VGI, PLANB, MINT, VNT, WORK, MAJOR, JMT, PRM) Impressive dividends in 2H19 (INTUCH, ADVANC, KKP, TCAP, LH, QH) Recommend stocks: TU (BUY/ IAA Consensus TP Bt21.4 vs Bt19.3 close) - expect strong earnings growth in 2Q19 driven by lower tuna costs (-38% YoY) that should lift GPM from 13.8% in 1Q19 to 16%. The positive growth momentum should continue into 3Q19. WORK (BUY/ TP Bt35 vs Bt29.5 close) WORK is a turnaround and value stock. Earnings should continue to recover led by program reshuffling and improving ratings, especially for 10 Fight 10. WORK has ample cash after the authorities waived the 5th and 6th installment payments for the telecom license. WORK may pay an extra dividend or acquire new businesses to support future growth. Today's highlights: PTTEP announced in-line and healthy 2Q profit, but SCC's net profit fell 40%qoq and 43% BUY PTTEP but HOLD SCC: PTTEP reported Bt13,684mn net profit for 2Q19, up 10% QoQ and 281% YoY, supported by (i) higher sales volume to 334,627 boe (+5% QoQ and 10% YoY), and (ii) higher ASP, to US$48.26/boe (+4.4% QoQ and 2.8% YoY). However, SCC posted a weak net profit of Bt7,043mn (-40% QoQ and 43% YoY), 16% below KSS’s and consensus estimates mainly due to the poor petrochem unit (lower products prices and stock loss). PTTEP declared Bt2.25 DPS, implying 1.7% yield (XD on 7 Aug), while SCC declared Bt7 DPS, implying 1.6% yield (XD on 8 Aug). CRC, a major shareholder in ROBINS, announces a Tender Offer for ROBINS shares at Bt66.50 each. The share price could hit the Tender Offer price today: Central Retail (CRC) holds 53.83% stake in ROBINS. CRC is making a tender offer for all of ROBINS shares at Bt66.5/share and would delist ROBINS under its business restructuring program. CRC will later increase capital and list on the market, subject to shareholders' approval at the meeting on 5 Sep. ROBINS shareholders will receive CRC shares (IPO or new shares) in return. The swap details have not been revealed, but ROBINS' share price should rise to the Tender Offer price (10.4% upside). GPSC announces 1:0.8819 RO ratio @ Bt56/share, implying 9.7% dilution XR: The rights price is at 21% discount to the market price of Bt70.75 and 7% below KSS’s estimate of Bt60. The money will be used to fund the GLOW acquisition deal, which will reduce GPSC's D/E ratio from 2.3x to 0.6x. After consolidating GLOW's financial statement, profit should improve and offset the EPS and price dilution effects. A dip in the share price would offer a good opportunity to accumulate. KSS maintain TP at Bt80. Report Today PTTEP - Better quarters yet to come (TP Bt160.0, BUY) 2Q19 earnings came in at Bt13.7bn (Bt3.3 EPS), up 10% QoQ and 281% YoY, (booked Bt7.1bn non-recurring expenses in 2Q18), driven by stronger sales volume and higher ASP. Earnings momentum remains solid supported by additional sales volume from Murphy acquisition (completed 7 July). Maintain BUY, TP Bt160/sh, pegged to 13.7 FY19F PE; declared an interim dividend of Bt2.25/sh, XD on 7 August SPALI - Valuation is stretched after strong rally (TP Bt23.0, HOLD) SPALI is one of the few developers that will deliver earnings growth this year. Hence, KSS assigned target valuation at its historical average PER 8x, instead of -0.25SD of mean for other developers. But with limited upside to KSS’s Bt23 TP and stretched valuation, KSS rates SPALI a HOLD. SCC - Still facing headwinds (TP Bt460.0, HOLD) 2Q19 earnings came in at Bt7.0bn (Bt5.9 EPS), -40% QoQ and -43% YoY, dragged by weaker chemical and packaging businesses, stock loss, and Bt2bn expense related to the new labor law. Domestic cement demand grew 3% YoY driven by government sector with higher YoY selling prices at Bt1,750-1,800/ton. Chemical margins should remain soft due to weak demand and new supply. Maintain HOLD, DCF-based TP at Bt460/sh; declared an interim dividend of Bt7.0/sh, XD on 8 August