Year end Article -with 2-3 key choices for 2019.
Year end Article -with 2-3 key choices for 2019.
I think year 2019 will be an overall good year for Thai stocks and with 30 years of experience here, the below 2-3 choices are my clear favorites. Of course proper diversification is always advocated.
First, one must realize how much smaller and mid-sized listed firms, which represent 70 to 80% of the Thai broad economy yet have so much lagged over the past 3-4 years, here pointed out already earlier this year. While the SET benchmark index is at similar levels as compared to 4 years ago, the smaller cap indexes like sSet and MAI index have half or more their respective previous levels.
The reasons are 3 fold:
They were overvalued to begin with at the end of 2015 with p/e's in their 20-30's, due to ultra-low interest rates here.
earnings for many dropped off since 2015, as the Military run government (since May 2014) restored some stability yes, -but not with little businessmen acumen to show for. Thai's, like foreigners, shy away from non-democratic government and business overall much slowed down in many sectors. Domestic Individual retail investors scaled back investing due to the above 2 reasons along with inept local broker practices which resulted in many retail clients loosing money and walking away. Short term maladroit practices like, advocating/inducing over trading, inept analyst reports, poor information and broker management.
Not least a US very bullish market since 2016 which rose dramatically and hence sucked allot of capital out of equities world wide, as it was the best stock market worldwide. But this has now ended and Morgan Stanley lately in my view, rightly so states, that US stocks is not the place to be next year but 5 emerging markets are, notably Thailand. Thailand will benefit overall from the China- USA trade war.
Year 2019 looks promising at least for some of the period due to Thai elections now assured happening in late February 2019. Stock markets love return to democratic elections, especially here as it underperformed so long. There is allot of catch up potential as the Thai economy will likely grow twice as fast as in the US (projected around 4.2%), dividend yields are around 3.5% or triple Bank savings account which pay ultra low interest of around 1%. And interest rates are set to rise less here and into next year, then say in in USA. Last week for the first time since 2011, the Bank of Thailand raised interest rates by 0.25% and the market rallied that day even while in the US the market sank on similar news. Today the Thai market is on the up, despite many days of US stocks trading much lower and another big loss last night. A good divergence sign! Foreign institutional investors have sold out a huge, huge amount of Thai equities over the past couple of years, in fact absolute record amounts of capital has liquidated. The twin benefits of Thai elections imminent and US stock market peaked will almost certainly reverse this. On top the Thai Baht currency has been among the strongest in the world even outperforming the Swiss CHF of late.
There are a few very interesting selections but if I had to pick just 3 companies at this year end it would be CHO and PTTGC. With PPS (0.69) the 3rd. PTTGC is ranked lately at the 12th largest capitalized stock here while CHO a rather smaller capitalized one, yet both have 5 star corporate governance rating. I also like ACUT (5.90) allot as a key/core growth stock for 2019 and think by mid year 2019 PPS will make a move up.!
PTTGC (72) trades regularly among the 10 most actively traded stock here. PTTGC ranks as the 12th largest market cap here, of over 600 stocks. It has at a low current p/e of barely 7.2 and yields a current dividend of 5.8% its web site gives a short description as follows. (The key in understanding the bullish view on PTTGC is that its becoming far less of cyclical company, then in the past):
comprised of diversified and comprehensive petrochemical businesses, including manufacturing and distribution of upstream, intermediate, and downstream petrochemical products. These products can be converted into other chemical products and serve as basic feedstock for downstream industries such as packaging, apparel, communications and electronic equipment, electrical appliances, vehicles, construction materials, engineering-based plastics, agricultural equipment, and much more. These products are not only part of our everyday lives – they also improve the way we live.
I think the ADR symbol is pchuy . Their web site is: https://www.pttgcgroup.com/en/about
You can see the company summary at this link:
https://www.set.or.th/set/factsheet.do?symbol=PTTGC&ssoPageId=3&language=en&country=US
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CHO Thavee Public (1.44) company with symbol CHO (no ADR).
This company was lately awarded the massive Bangkok NG new buses, already got paid and delivered some 200 and will deliver another 285 early next year. It also got awarded the e-ticketing system that goes along with this, as well as a 10 year servicing contract for these buses.
A well managed company which also exports worldwide catering structures to Airlines like EMIRATES, new fire trucks to Vietnam and about to start the impressive Light rail project in the vibrant city of Koen Khaen, in the North of Thailand. The company, besides an exporter, is also establishing 8, 24 hour truck stops that will service Air Con trucks, where the driver can monitor the progress through their mobile app. There is a real need for this here, as Thailand like the US, relies much on truck deliveries. Earnings are now soaring for CHO and likely to continue so into 2019.
CHO’s current p/e is a tame 17 as this is coming off a transition low year 2018, when up until now it built up the massive NG bus award contracts, while not getting paid yet, but in 4Q 2018 has now started to. Earnings are expected to soar/roar in 4Q and into first half 2019. The company just completed a private placement with a prominent Thai business man, raising 100 mill Baht (3 mill US$) issuing new shares very close to the current stock price. The company is bidding on many new projects and gearing up for a much higher revenue level in 2019, like example rental Hybrid vehicles to the BMTA. CHO describes its business as follows: Design, inventing and manufacturing commercial automotive engineering systems including rail technology and defense industry products for example trucks, trailers, buses, catering trucks, trains, fire rescue vehicles, armored vehicle, troop carriers and battle ships.
You can see how the new Bangkok buses are just today servicing the capital at this link:
https://www.bangkokpost.com/news/general/1597918/premier-unveils-ngv-bus-presen
You can see CHO company summary at this link:
https://www.set.or.th/set/factsheet.do?symbol=CHO&ssoPageId=3&language=en&country=US
I share the above in good faith and wish to be on record as this difficult year ends, and as a Merry Xmas and Happy New Year 2019.
Best Regards,
Paul Renaud.
