TOG, company visit through their SET Oppt Day presentation on June 17.
TOG remains a favored small cap here. This company is a long established dominant exporter of glass/lenses increasingly benefiting from 4 distinct events. Massive new on-line time in key markets, aging demographics besides massive govt. handouts, wearing glasses is no longer the stigma -in fact increasingly a fashion statement by many.
After listening to their SET Oppt. day presentation yesterday, I remain a fan and post publishing here for members my strong-buy view at 5.90 Baht a month ago, I today reiterate my buy view -despite its 20% stock price increase since then.
Thai Optical Group Public Company Limited (the Company) or TOG (6.90) was first established under the name Thai Polymer Lens Company Limited? on March 8, 1991 by the Pracharktam family to produce organic lens, to complement the existing production line of Thai Optical Company Limited (the Subsidiary Company) or TOC, manufacturing mineral lenses for more than 52 years. SET Listed under: Consumer Products/Personal Products & Pharmaceuticals. Here is there web site: https://www.thaiopticalgroup.com/
Lots of rational investors from all over the world are looking & searching how to capitalize on the aging & increasing health requirement of the developed world (i.e demographics). This as well on the new reality of people staying/working ever more at home -while looking at screens more than ever before. Medical tourism and its related fields is a big new buzz word/concept here and getting lots of attention as elsewhere, again because mostly of “rich nations and people are increasingly getting older”. This combined theme is taking off, albeit some require ability to travel. Bloomberg recently had a long article interviewing investors/analysts on how older people are now spending more money and for higher quality medical and related services then before. A US news channel (forgot which one) interviewed people spending hundreds of $, if not more on frames for glasses, which increasingly go beyond a key requirement, more like a fashion statement.
Medical related products/services/materials/procedures from hip/knee replacements all the way to hearing aids and more is in a pent-up boom now-and this will likely last at least to some degree beyond its strong demand at present. As this has been neglected since very early 2020. With covid vaccines roll-outs impressive currently, all over developed countries, things are getting back to a new normal -along with massive unprecedented government hand-outs; just about the world over.
Institutions, investor-analysts and more are fanatically looking how to capitalize and get exposure on this confirmed new movement; enhanced by demographics as just about all over the globe average age is increasing on top eyes are getting soar/tired/strained from all that clicking and screen viewing. I.e. Covit, demographics and vast change of habits on top are in favor to TOG. (sorry for the repeat). TOG (6.90) is my clear choice for us individual investors here on this theme. TOG which exports 95% of total revenues and so is far removed from Thai economic drop off, bad politics or meager recovering tourism besides poor Thai economic economic growth.
TOG stated yesterday it has no problems with container shortages for export transport, as this is now “back to normal”. The company will spend about 160 mill. Baht to rebalance/restructure its factory to increase its production capacity by 20% to be completed within 3 Q or by 4Q this year at the latest. As TOG has 425 mill. Baht in cash on hand -there is no need of any capital increase to finance this expansion. Long term debt is negligible. However, note some 57 mill. of this was paid out in cash dividends on May 7th (0.12 Baht per share, 474 mill. shares outstanding this was for 6 months). I expect TOG dividend should increase this year, compared to last. The company states on Dividend Policy: "Not less than 40% of its consolidated net profit after deduction of all specified reserves". However note in the table here how the company has a long record on paying out far more then this stated 40% of earnings...more like close to average 80% over the past 14 years, ever since they went IPO in May of 2006 at 2.80 Baht at PAR 1, which is the same as at present. (I note a typo in year 2006, which should show 66% of net profit not 17%. The last dividend was for 6 months, i.e. 01 Jul 2020 - 31 Dec 2020.
The PRACHARKTAM family which are all part of the CEO, MD and Chairman positions own significant shares in TOG at from what I can determine is direct or indirect 50% of TOG. There has been no insider selling/buying on TOG of any significance in recent years, except for a few small purchases in 2018.
The Middle-East, India and China are attractive new emerging markets for TOG. India was taking off in a big way until covit hit this country hard in April/May -which dented demand. But AU/NZ remain strong/ and growing markets. As well the USA which should do at least 10% of it total revenues -and also growing fast. TOG has a warehouse in USA to accommodate on-time lens deliveries.
Anti-fog and anti-blue are new premium lenses which are in higher demand and deliver higher profit margins. New lenses’ innovation is not a regular occurrence (say like high tech) and new technologies/products tend to last a while. The company stated net profit margins should linger around 10% this year, or perhaps even a touch higher as raw material costs, factory capacity and sourcing is not a problem/issue. All as reported in their SET Oppt. Day presentation yesterday.
People all over are spending more time reading/on-line visiting/searching/booking/entertaining/conferencing on the internet than ever before and its anti-blue lenses is the answer to be more easy on the eyes. Further due to such massive govt. mega spending/hand outs my take is more and more will be upgrading their reading glasses, so here is the double whammy on top of all else: unlike years ago, wearing glasses for vision and/or fashion is no longer viewed-down upon, as in the past.
TOG believes it can achieve 2 billion+ Baht in revenues this year and taking his comment of 10%+ profit margin leads me to believe TOG will earn a record amount of say 200+ mill. this year 2021, or about 10% higher than their previous record year in 2017! Back then TOG stock price was lingering around 8-10 Baht. The high 0.20 Baht per share 1st Q. was a bit of a high aberration due to spill-over from the 4th Q. Hence, my take from listening to their SET-Presentation is to estimate of 0.65 Baht per share earnings for this year. On this TOG is trading at a calendar year 2021 p/e of 10.6, far too undemanding when you consider the quality, leadership and global reach this company has in a field which has favorable demographics besides a covit beneficiary and massive acceptance.
Surely more and more people the world over are wearing glasses at least part of the day. Yes some will opt. out, due of laser surgery and Refractive lens eye surgery but this is an expensive procedure (in Thailand at least 125,000 to 220,00 Baht) and often viewed as intrusive surgical eye procedure most people hesitate on, not least due to the expense which is not reimbursed by health insurance.
As always, I welcome any comments, additions or inadvertent mistakes made here to be pointed out.
Best Regards,Paul A. Renaud. www.thaistocks.com