SAT, fundementals support still higher stock price.
I remain upbeat on SAT (14.50) and would be adding to positions on this current mini- pullback, after setting a new recent yearly high price just a couple of weeks ago.
SAT has been a prominent selection of mine increasing already over 50% since I rated it a strong buy earlier this year. I think the stock has more to go and will creep higher. SAT keeps benefiting from their main customer Mitsubishi and Toyota as they are their key export customers. Honda as well features as a prominent customer.
Revenues of SAT are likely to stay strong for long due to a 4 year contract on-hand of over 2 Billion Baht for car & truck parts, bus and tractor parts. SAT will start on this new order starting next year. SAT will also benefit from new energy efficient cars coming to the market, especially from Honda Motors. Coil-springs and stabilizer-bars are the key products for Honda "Accord" and Honda "Jazz", these are two new part products for new "save energy cars", such cars coming to market likely next year.
The middle Eastern countries are in a big and now prolonged boom due to the persistent high price of Oil -and an overall better management of the Gulf economies. SAT is a prominent supplier of parts to pick-up truck parts, adored and growing explosively in the Gulf countries. For example in 2006, the growth rate of the non-oil sector in Saudi Arabia was 7.8% compared to 1.6% for the oil sector, so an economic broadening beyond the oil sector is taking place in the region.
The Gulf countries in general have been scaling back on the role of government in order to focus upon the development of their private sectors. This is likely to continue fuel the non-oil sector and so broaden the economic base by increasing GDP per capita. To me this means still huge untapped potential for the Gulf country populous there to have increased consumption, and pick-up trucks features prominently among this.
Further, the Gulf economies have huge new reserves to invest around the world, of which some 1/3 will go into equities. As a recent report by prominent economist David Hale shows, Asia is well underrepresented in their portfolios. New capital investments from there are likely to fow into the SET/Thailand, post elections. And SAT should benefit of this as its a Thai company directly benefiting from increasing Truck exports (and so needed parts) to that region.
Today I send each member a copy of the David Hale recent dissertation of the Gulf economies boom, well worth understanding as it has immense global consequences.
Best Regards,
Paul A. Renaud.
