Reaffirming my 2 core picks. High yielding -while being defensive.

PaulRen's picture
Portfolio Update

I still mostly only favor AUCT/TOG as my strong core picks for all the reasons I lately outlined. So lets see their financials by November 15th.

AUCT report a strong 2 Q., along with interim dividend. TOG as well but here we may not see the full benefit of Baht weakness as this came by late in their 2Q.  TOG does hedge its currency as described in their annual report. But still benefits from Baht weakness.   I gather their October Las Vegas, USA trade show was “better then expected” just as the Baht vs. US$ had weakened. I also expect their new factory solar power installation to reduce electric power consumption cost considerably, so this helping net profit margins.  Next year looks exciting due to TOG’s new 800 mill. Baht Rx lens capacity-increase in progress for some months already, further a higher profit margin benefit. Coming on stream early next year, post months long trial runs at present.

Whenever there is a world crisis think what is the first thing people (as many companies) retrench on?: its travel/holiday and luxury spending as is much new investment. They stay home not least as the internet/free calling/video etc  allows to remain in touch at home -often or more then when abroad.

Could it so be that a leading global ye sight lens producer may well be anti-cyclical?  As if more people stay home and save money, so invariably spend more time on screens, the baby boomers/bloomer’s are not getting younger, nor is the myopia generation retreating. (reviewed in a previous article).   Most advanced or semi -advanced economies and many others are seeing an overall aging of their society which so very often requires more eye sight correction via eye glasses/lenses.  Hence in a soft way perhaps, but yet still, will benefits from these mega/demographic trends -regardless of any world crisis.  Its a long term growth industry, I think.   What do you think?  Corrective vision is a semi-defensive product needed by individuals. Increasing in older age, so demand worldwide -as if you need it you almost certainly got to get it.  Or worse.  "La vue est la vie".

TOG (11) stock price has doubled since first here table pounding 2 1/2 years ago, but its earnings have tripled during this same time!  Hence the dividend yield remains in my view around 6%.  The company has as long documented very high dividend payout history/record, well above 50% of its net profit, year after year.  And due to its so very large insider-ownership -will likely continue this policy in my view.  

Hence despite mkt. fluctuations and at times low trading volume and despite the overall macro situation being dire & concerning, TOG is an excellent place to continue investor-hide the current mkt. doldrums and as has shown to date -since I strongly viewed to accumulate here ever since 6.40 Baht.  Remember, some 95% of TOG revenues comes from exports, so is insulated from for now tame Thailand and more tame Baht currency.  An indirect hedge on if the Baht vs. US$, drops further, besides globally in a semi-defensive industry.

Surely there is global competition but as seen following them for years now, TOG can handle the competition besides has now superior lower cost advantages due to now weaker Baht/US$ currency.   Its noteworthy and showing of alpha biased strength in its stock prices by holding up so well even while the SET tumbled all year.  Call it relative-strength,  a good sign.  Similar with AUCT.

For all these reasons -and more- I still very much favor with a strong buy view on TOG, despite its formidable stock performance over the past 2-3 years. I dare saying here so before its 3Q earnings release which of course I have no upfront knowledge -nor guidance. To my knowledge only 1 broker follows TOG, so far.  

For longer term rational value investors seeking yield and growth TOG(11) along with AUCT (9.90) are for some time -and remain so- my best 2 Thai stock ideas for now.  With very strong conviction... Just for disclosure purposes here and be humble in front of Mr. Market,  of course -as always- I can and have been wrong before. 

Best Regards,

Paul A. Renaud.