Defensive stocks in a cautious environment. Food for thought!
Here are in fact indirect beneficiaries or they have no effect from the current economic slowdown. (See comment on President Rice in just previous write up). Further imagine the scenario in late '97 and '98 of falling local interest rates just while dividends here are rising. Besides these are often tax preferred dividends, due to Board of Investment privileges. We remain convinced interest rates will drop, perhaps dramatically, by 1998. For one, the recent limited currency controls, targeting the speculators, will benefit temporarily, Thailand with greater control over Thai monetary policy.
Below are some numbers. We first narrowed this list to 15 companies which are capitalized at around 420 mill. US $ or, a bit over 10 Billion, Thai Baht.
On trailing last 4 quarters earnings, average p/e is: 4.6Average annualized dividend, over past 4 Q's : 9.9 %Average price to book value: 0.82
We further pruned our list down to four, capitalized at 130 mill US $ or 3.2 Bill. Here are the real "jewels":
Their average p/e is : 2.5 Their average yield is: 12.2Their price to book is: 0.68
We know that these are among best values on the Thai stocks exchange currently and want to be on record of adding these to our now preferred purchases.
The company's earnings are defensive because they are not very economically cyclical. In any western stock market they would sell at a premium to the averages just for being "earnings defensive". Especially when consumer spending is dropping. Instead, in Thailand they are selling at ridiculous low prices !
It is the same old "Chicken and Egg’story: the funds do not buy them because they are too small and so the Thai public do the same: ignore them. For years already they sit at rock bottom market prices despite growing above average. The key difference now is the current bear market which brings this to light. As a group, the dividends should roar while the local interest rates, inevitably drop. Then the dawn of revaluation will set in. In the meantime accumulate and focus on these.
Saturday, June 14, 1997
| Company Name (stock symbol) | p/e | div. yield | book value | today's price |
| Thai Union Frozen Products (TUF) | 3 | 14.3 | 29.3 | 21 |
| President Rice (PR) | 3 | 9.7 | 37.5 | 23.5 |
| Siam Food Products (SFP) | 2.5 | 25 | 67.8 | 60 |
| Malee Sampran Factory (Malee) | 1 | 0 | 6.7 | 9.6 |
| Thai Wha Food Products (TWFP) | 3 | 12 | 47.6 | 15 |
Table & updated values of specific stocks recommended to subscribers on June 14th, 1997.
Updated as of 14th of August '97: 12:26 PM 8/17/97
| Company name & symbol. | p/e | div. yield | book value | 15.Jun.97 | 14.Aug.97 | % Chg. |
| Thai Union Frozen Products (TUF) | 3 | 14.3 | 29.3 | 21 | 28 | 33 |
| President Rice (PR) | 3 | 9.7 | 37.5 | 23.5 | 24.25 | 3.2 |
| Siam Food Products (SFP) | 2.5 | 25 | 67.8 | 60 | 78 | 30 |
| Malee Sampran Factory (Malee) | 1 | 0 | 6.7 | 9.6 | 24 | 150 |
| Thai Wha Food Products (TWFP) | 3 | 12 | 47.6 | 15 | 15 | 0 |
Increase in portfolio value, assuming equal investment in each: 43.2 %. (Period shown above is Jun 15th'97 to August 14th'97,all closing prices).
For addresses and company description, see subscribers version.
Paul A. Renaud.
