TOG, my most important update!

TOG (10) Buy view very much maintained.  An  important update.

The utilization rate of new the Rx lenses’ expansion earlier this year is now already at 85%, which just started & test runs conducted in the Q. 1 of 2024. This due to very strong demand, especially out of the US.  As you can see from my just previous article on TOG.

Here is the surprising news: TOG will invest an additional 600 to 800 million Baht in Vietnam to produce even more of their new, higher profit margin Rx lenses, this so may call for a potential capital increase by 2 Q next year.  No decision has been made yet on that!  If TOG were to borrow from its banks for this extension, say the whole amount for this 2025 Rx lens expansion, it stated its D/E ratio would increase from 0.8 times to 1.1 times -and this is still lower than their max. target 1.2.  So bank more borrowings is still the likely option. Remember TOG insiders own close to 50% of the outstanding shares so a capital increase would require a very, very large capital infusion by the insider-owners, the PRACHARKTAM Family.   You can see shareholder structure of TOG at this link:

https://www.set.or.th/en/market/product/stock/quote/TOG/major-shareholders

In the future, tariffs on China exports to USA lenses, would/will increase attractiveness of TOG product/lenses. As China is a competitor. 2025 will grow again mostly coming from USA, which has been growing rapidly as we see in my last report here.  4 Q ’24 will see continued growth in sales & profits and TOG expect a new all time profit high on as well seasonal factors and Rx the higher profit margin.

Net profit this year, per company guidance, should come in at 436 mill. Baht and next year 2025, at 478 mill. Baht, mostly coming from corporate US larger customers +30%.  First 9 months so far this year was reported at just net profit of 298 mill. Baht, so the 4 Q. should be very impressive to come to around 436 mill. for all of 2024. Its 4th Q. and so full year 2024 results will be announced in mid Feb. 2025.    

 As TOG has 474 mill shares outstanding, the EPS will reportedly be just about 0.91 Baht per share. Increasing to 1.01 Baht estimate for next year 2025.  Hence the forward p/e ratio for year 2024 is barely 10 -and dividend 7%, very undemanding for such a quality more defensive long established company which gives for years already regular “SET Opportunity Day” live 90 min. presentations. The company has previously stated it does not think the dividend payout will be affected by their increase in production of Rx lenses.

Exports of lenses from Thailand expected to grow 8% in Q4, with higher net profit margins which Rx lenses command.  I do expect the dividend to remain the same at 6.4% on the current mkt. price of 10 Baht, but to increase to 7.1 % for the following year.

Note how the SET just saw a large sell off this week mostly on “big bad bear cap’s’,  near price collapsing, i.e. CPALL and CPAXT, which now in addition have some new serious corporate governance concerns. Today you know again why rational value investors should stay away from them.

Even other over-hyped/over-valued stocks regular volume leaders on shares trades here, like GULF and DELTA, are lately trading well off their highs.  This vs. TOG, which barely moved and holding its own around 10; despite the SET index now suddenly & likely closing lower for this year, compared to last.  One relative “negative” on TOG is its small float and low trading volume -for now. Marketing officers, which often like to exaggerate this “handicap” because they don’t want to recognize that 1) we retail investors have far lower liquidity requirements then say institutions or day traders and 2) Any TOG sell-off usually sees immediate new buying coming in and there is lots of hidden buy interest on any weakness there, even while not shown. As is so often the case on very undervalued high dividend stocks. 

I am and remain TOG investor enthused despite its mkt price doubling since I first here pounded the table (starting around 4 years ago), inclusive of dividends), while its earnings (per share) have quadrupled since.  It so is and remains one of the very highest dividend % payer in Thailand, while being a quality growth stock in a defensive industry -with some 95% of revenues coming from exports.  So an indirect hedge on any Thai Baht currency weakness.  This year TOG will show record earnings again along with highest revenues ever, even despite the Thai Baht having increased some 8% vs. US$ in 2024.

To be clear I don’t think TOG stock price will double in price and “go to the moon”; instead I think it is and remains a solid investment with very high current dividend income along the way, where its stock price should move-up in time, so providing a solid total return during these more difficult times and a compared to a “Gilded age” overvalued US stock market.  Remember, TOG for many years now, regularly & 4 times a year, give "SET OPPT" Day 90 min. shareholder update presentations by its CEO and other high level executives in their company. While in Thai language all graphs and tables are shown in English -and later most often uploaded to YouTube.

Best Regards to all members, happy to share this solid good update on my favorite stock.

Season Greetings and Happy New year 2025.