Late comer version/more up to date thoughts.

PaulRen's picture

More reflections and/or help for a Late Comer.

Reflections as we enter the 1 Quarter 2014. As I see it. DEMCO remains the star and CHO the great growth stock story.

Some recent members joined us this year some of last year dropped out. No doubt these only got going when the SET was up a year ago, only to be disappointed when it fell back on the slowing economy here, the developed countries declaring emerging markets are out of favor for now (with some good reason even while generalizing) and not least, bad politics and the Bangkok uprising due to that.  This shows again how you have to be ahead of the curve not await until things look good. We must all ask ourselves if this is the situation in reverse now, where stocks remain cheap but likely to do better as the year unfolds, the politics a bit more stable and the market starting to discount a better year 2015.

Developed countries have been jealous (if I dare to say so) over the past few years due to developing countries doing so well up until recently.  The SET index for example far more than doubled at one point from the lows of the N. Atlantic induced financial crisis even while the EU/USA muddled along. 

Notwithstanding the fact that US stocks have done much better of late, recently studies have shown that globalization has lifted billions out of poverty over the past say 10 years, but at the same time have created immense and ongoing income disparities to developed countries.  Where there the top 1% have done well and then some vs. the rest, which has been left behind.  No wonder developed countries feel they have an ax to grind on all the fanfare of globalization and  no wonder the US Fed among other institutions would like this to reverse the disturbing US income inequality where reversing capital flows back home may seem to be their first order of business. They have succeeded by talking up the set back of emerging countries while at the same time making upbeat prognoses on their own still stale recovery.

Back to Thailand.  After a nice bounce back its now difficult to envision the short term, as always.  Will the SET index correct some more after failing to pass 1370 last week on the new goods of lower interest rates and the ending of the Thai emergency decree and new elections planned within a few months? I.e. has this been price discounted?  Or, have we already consolidated the gains of late last week and a new round of buying will push the index to 1400?  You guessed it, I have no idea.

One thing I did stress all this year and last to both new and senior members, is to load up on DEMCO! If members did not do this I can’t help it, as I wrote so & gave ample supporting information/research/insights and more. All re-affirmed when this favored company reported yet another great (4th) Quarter, finishing of the year on a high note and then MayBank/Kim Eng’s great research report re-affirmed it all. The company will about to get more institutional exposure on April 1 when it hits the Singapore road show. 

To those whom paid attention (I hope all of you as you contributed here), you grasp this company will not have much if any effect from bad politics for now, nor the slowing Thai economy.  To me its the ultimate non-cyclical play with high earnings growth, good dividend income along the way and a p/e still hovering much lower than the SET’s averages!  Most of all, few brokers & investor news reports have caught on.  Look forward to a great “SET Oppt. Day” presentation this Monday starting at 1:10 PM, it will be in the Thai language but there should be a slide show on the financials, backlog and more and you can there submit questions for answers back in English.

Here is the link:

Then look for the DEMCO slot and watch the webcast live.  (You may have to download a small program first).

Lately I continued to post upbeat comments on CHO, my favorite pure growth stock and a model portfolio selection. This company has given a very upbeat “SET oppt. Day” presentation last week; I also sense its not very cyclical and run by a very smart/alert MD and majority shareholder.  Ideally if the stock and warrant correct a bit after the recent run up, I view it as good buying opportunity. As pointed out, their last year listed warrants  (CHO-W1) are of good value as these traded deep in the money, being convertible 1 new share for 1 warrant, at 0.50 per new share, with some 2 ? years left to go.  

PCSGH has gone XD 0.15 Baht on Friday, so the stock should drop by this early next week and maybe even a bit more.  If its dribs to nearly 8 Baht I view it a solid buy as pointed out this is a high quality growth stock which should become live as the economy bottoms all the while exports holding up. You got to get in early, before the news reports the Thai economy is bouncing back, even while we don’t’ know when that is. I fully realize I may be a bit the early bird here, but I am willing to take the chance as it’s a top quality company from what I can tell.

I purposely do not mention too many stocks or new ideas as my vision of late is to focus on the winners, not diversity just for that.  Despite DEMCO roar up this year so far, its far below the old high price of a year ago and I keep seeing it with still a buy point of view.  Again all my opinion expressed here are my own with the longer term investment objective.

Last week some property stocks moved up due to ever lower Thai interest rates. So be it as I am not chasing these.  I don’t have a good handle on them and worry they are a cyclical bunch -and my own preference are companies which are export, non-cyclical and not too dependent on the Thai consumer. We should try to own companies we can sort of identify with and like.
PYLON and CRANE remain my picks in the construction related sector.  The Thai mega infrastructure government spending program is now in the back burner but I believe exposure in these 2 still have merit with the later to benefit from all the mega green energy lifting requirements later this and into next year.  Along with its rich and understated balance sheet as explained in previous articles/postings.

The laggard:

QTC’s presentation last week was not very exciting and without fanfare. It’s sort of my dud dog of the group and lost its earnings momentum when both the Thai economy lost steam and the politics heated up. The MD there is an upbeat proud person even so, when things are not very upbeat as just now there are no government orders on hand this year.  I kind of yawned a bit during their SET Oppt.Day last week,...concerned how its a one product company with plenty of local competition. Yet, he is/has the high quality product with so deserved pride and exports more successfully vs. the rest. 

QTC Investors at current prices are ok but I am no longer excited...and no, the MD never picked up the ball to meet-up with me in the upbeat way, after I wrote him so in early March.  His assistant said he could meet up next time in Bangkok, sans plus.  I would rate QTC a hold, as it still has a nice dividend.  My worry is QTC could become a wall flower and there are more dynamic picks out there.  Sorry to all members for not earlier having advocated a stop loss or switching into DEMCO, or CRANE or CHO or PPM all stocks I still like.  We all hate to admit that at times we can be wrong, but on this one I was as of now -and felt a bit let down after the upbeat visit and factory tour last year.  QTC mislead us a bit.

Hanging in there:

CITY and PTG seem to be more buoyant with earning growth prospects of late and so I am willing to keep them for the patient longer term minded.  CM disappointed some as well, earnings wise, but has a nice dividend yield (just went XD the week before) and so remains my only food stock choice.  SVI is a more complicated dynamic mid cap which is expanding in N. America and benefiting from lower Baht just now and high US/EU growth rates now in play.  I am willing to take my chances on it, even while I must say it’s a complex story and the MD there determined to make it work (their new US/Mexican operation), to the point of maybe even being stubborn if it does not?  That is the risk. 

Switched some time ago:

UAC/HYDRO reported yet again poor earnings and have not offered to meet up, I posted in our lounge some time ago to move instead into my top pick DEMCO!  I find myself in a position just now of not being overly excited except on a few stocks, even while I know we should own more. 

If I had to:

IF I had to pick 5-6 just now it would be DEMCO, CHO, PPM, CRANE/PTG -and PCSGH on the recent weakness.  Obviously I would prefer to get these on any price correction which should happen into April.  Of course I likely missed a few, as always.  Stay tuned. Yet I am confident I can show yet another year of SET out performance. Time will tell.

Best Regards,