Updates on previous comments and a new stock we like.
First, yes we are exited by the warrant/dividend annoucment of SE-ED (24). Issuing warrants for future expansion, might well be the new way for smaller Thai listed firms to attract much deserved attention. We are delighted!
For a longer and short term price graph on SE-ED see: www.asiawise.com/mainpage.asp?mainaction=21&action=2&stockid=273&g=SEED.BK_6#
Reflections on a few topics of interest.
At the beginning of the year we felt SET bullish entirely for domestic reasons. Had the US and Global markets not had such a nasty tumble, no doubt the SET benchmark would be higher today. Still, in US Dollar and Baht terms, the local benchmark is a touch higher today then on January 1 '01. Hence, relative to the world the Thai stock market in general has been "a good place to hide’since Mr. Taksin head the new Thai government.
Our favored major big cap selections of BANPU, CPF, RATCH have been good core choices so far. Post-dividends, they have beaten the local & global stock indexes.
Separately we will shortly show how our "top 30 values" main portfolio held up, during one of the World worst stock market downturns. In fact, it is now fair to point out that smaller, high dividend paying Thai value shares, have been the best asset class to hold, for some time now.
The recent two new selections of SRI and SE-ED should in time continue to show that finding a good balance of various smaller Thai value shares, is still a solid and responsible way to invest for the long term profits and high dividend income on the SET.
While I remain a "mild SET bull", I must insist that selectivity is more important then ever. Just buying a few liquid shares and waiting for a big rally is an increasingly dangerous way to bank on Thailand's stock market recovery.
Consider these core concerns:
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--We desperately need more SET reforms, at the root level. Words like "coming" or "soon to be announced" mean nothing around here. ---We need overall more professional local brokers. Thai brokers whom advocate astute investing, not just advocate trading & speculating. Brokers whom seek to get under their influence vast "trust capital". Meaning, savings which are not earmarked for speculation; yet savings which still desperately seeks higher returns. As stated so often before, the dis-intermediation of savings in Thailand is at a horribly low level here. ---We need the Thai SET/SEC to immediately allow listed companies to buy back their own shares if they want! I for one believe that if things get much worse in the US stock market, many US firms will start announcing their own share buy-backs. Thailand's dormant regulators should have long ago allowed this. ---We need far more individuals to participate on the local stock exchange in an investment smart way, so the current immense stock distortions -get ironed out. It took the Swiss citizens a while back for example, a long time to figure out that low Swiss interest rates, are there to stay. Then lately, high dividend paying shares woke-up. Let 's see how long it takes before the masses wake-up here. ---We need global and Thai investors whom are willing to read and analyze their own sources of information. These investors must at times be willing to pay for good & experienced insights, as the actual buy/sell transactions costs have continuously fallen lower. Brokers are not always the best, nor by far only source, to get objective added value & unbiased information. When will this sink in? *** |
Reflections on some recent comments:
1) Some time ago we advocated a few speculative picks in the long forgotten property sector and even one in the beaten-down electronics sector. QH, HEMRAJ and KRP are more speculative shares. But we think they could pick in price when the SET moves higher! This might seem odd to the more conservative investors, which we side with. Since the SET stalled a few words here are warranted:
In the Asian Wall Street Journal of Monday March 26, 2001, a quarter page article was devoted to the Thai Property market. It was an upbeat story where LH, the sectors blue chip, got positively singled out. "Occupancy rates in BKK are firming….Condominium vacancies in downtown BKK are firming…much overhang was cleared out last year….there may be a shortage of condo's in BKK's central district next year….", such were the catchphrases there, I remember. With local interest rates at absolute record lows -and this for some time already, I cannot believe we will not see a property sector rally some time this year.
2) For some time we have advocated BAT-3K (19) which has been a disappointment to date. A boring stock sitting just around 19, almost purposely so, to aggravate us owners.
We stated all along we are not giving up. At least now we can expect a dividend of 1.50.
(In the past the company was prevented by bank convenants in paying out any dividends). This firm benefits from a lower Baht as exports are a main core business!
The main reason for recent earnings shortfall stems mostly from a loss of their Cambodian operations. These have now been written off. Also, the company has no more FX exposure. We would continue to hold these shares, even while it probably is not one of my top 5 selections. (see just below, for a new choice)
A new stock selection we now like.
BIGC (16) is a new stock we like. At current prices I would rate it a long term buy to a diversified portfolio.
As I recently wrote: "Stimulating the Thai economy at the "grass roots" level is the hallmark policy of the new Thai Governmnet. Hence we now would favor Thai domestic consumption plays vs. just export or electronics.
BIGC was recently rated as "the favorite discount store in Thailand", according to their own in-house marketing study. Middle to to-low-income customers is by far the biggest segment and this is where BIGC ranks first. Tisco broker estimates earnings per share (EPS) should grow 55% this year and another 16% in 2002. Namely, 1.08 in actual EPS for 2000, this is expected to increase to 1.53 this year 2001, and per share 1.78, for all of 2002.
With over 60% of total sales in food related products these super-stores are rather business "defensive". Meaning not very dependant on boom economic times.
Because of its origins in the textile industry (formerly known as SK Garment) BIGC has much more experience in selling higher margined textile products usually called "soft line" products. (Almost 14% of last years total sales). These more desirable revenues have higher margins.
The current p/e is near the company's record low, ever. While these shares are not expected to pay a dividend until next year, we find BIGC a liquid trading growth stock at a near single digit P/E. Most of all it fits to benefit perfectly from a domestic consumption led economic recovery.
Some people think these super centers are growing too fast and that local merchants will become upset -as they are loosing market share. We agree, this could some day become a hotter issue. Yet, BIGC, is the most Thai of them all! Only 11 expats work there vs. some 10,150 Thai people. While 68% is owned by French retailer "Casino GP SA", Tesco Lotus, the main competition, are almost wholly owned by Tesco PLC out of the UK.
BIGC is about to add 5 new super stores this year, with one being in Phuket, not even 2 km. away from thaistocks.com's head offices.
For a good article on this industry see: www.asiawise.com/mainpage.asp?mainaction=50&articleid=840
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We like CPF, as a major food stock at low valuation:
CPF XD (39.50) stalls on its controversial 3 food firm acquisitions.
This is perceived good news to the investor community as in the past the planned purchase of these firms meet stiff resistance from some local analyst, as we pointed out in previous writtings. (For this see Newsflash index Feb 4th '01)
CPF 39.50 the country's largest food manufacturer, will now indefinitely postpone its plan to acquire three related food firms until the companies are "able to provide more mature operation results".
CPF suspended the plan following a report from its financial adviser, JP Morgan Thanakom Security. The report said "CPF should wait for future operation results from the companies and a better investment climate", as CPF senior vice president Adirek Sripratak told the Bangkok Post on March 31, 2001.
The three firms are Star Marketing Co, a manufacturer and distributor of fried chicken; CP Interfood Co, CP Group's manufacturing arm for sausage and other products; and CP-Meiji Co, a manufacturer and distributor of dairy products. The three are valued at a total of Bt2.3 billion.
Khun Adirek said: "We want to ensure that the acquisition will really benefit not only major shareholders but also small shareholders. So we decided to delay the deal for another few years. We don't want them to shoulder any risks," he said.
CPF is aiming for total revenue of Bt68 billion this year, up from Bt62 billion last year. The company reported a profit of Bt3.38 billion and paid a dividend of Bt10.02 per share last year. The total annual dividends expected this year are around 4.50 Baht per share. CPF is one of the few firms which pays their dividends quarterly.
CPF's main products include chicken, shrimp and pork. It targets both domestic and export markets. This year, the company will focus on exporting pork from the state-owned slaughterhouse in Chachoengsao, Adirek said.
The Livestock Department invested Bt310 million to build the plant a few years ago to provide standard processing lines to ensure the hygiene of pork for export markets. Thailand's pork exports this year are expected to reach 8,000 tonnes, worth Bt883 million, up from 6,281 tonnes worth Bt627 million last year.
The country is trying to penetrate new export markets for pork, especially in Asia and Europe, Khun Adirek said. However, import restrictions due to foot-and-mouth and mad cow diseases are making it difficult. Yet, health authorities in Hong Kong have already certified that the Chachoengsao slaughterhouse meets their requirements.
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Best Regards to all our Valued Subscribers,
Paul A. Renaud & Team.
