USA’s big problem & 3 current stock selections.
KCE (68.50). A solid choice in the lagging electronics sector. I still think the local market under-rates this stock and a rotational correction should bring some renewed interest soon.
With a continuing pick-up in sales for KCE, utilization rates are expected to lead to higher gross margins for the rest of 2002. Average gross margin is now forecast at 25%, given the fact that the price war over PCB’s has now ended. This is clearly evidenced by the 16% margin in 1Q02.
KCE has high product quality and a very flexible nature of its product applications. KCE has big name customers that have other potential new products on-hand. I expect to see new orders in other product applications such as game consoles and digital cameras coming, so generating more orders from several of its existing impressive customer base.
The company’s strong outlook from here on, is being ignored by the market. Such a low stock valuation and low expectations should lead to much a much higher share price this year. KCE stock price got hit in a rising market, by a negative earnings announcement on June 4th. But when KCE’s turnaround story becomes clearer to the market, its stock price should be re-rated to a far higher level. I think KCE can earn some 14 Baht per share this year and over 22 per share, next calender year.
BANPU (44). One of Thailand’s best managed listed company. Here is a solid energy stock which I am a renewed fan of. Earlier in the year I advocated to switch from Banpu to Stecon. Stecon was then trading in the low 20’s and Banpu in the high 20’s.Today, I would switch back to Banpu shares, for a long term investment. Stecon had a good run and if you can"t own both, Banpu may well be the better choice from here on. Stecon (60.50) is near my price objective of 65. Also Banpu stock should perform very well if world oil prices spike more, later in the year, when USA may declare war to Iraq.
ITD (38). I remain a new fan of ITD. This stock is the country’s biggest restructuring story, now near complete. After advocating a solid buy on ITD at 28, any weakness in ITD should be seen as a buying opportunity! If the SET corrects, so will ITD, but I would then be buying not selling.
The irrevocable debt-restructuring plan approved by the Thai Central Bankruptcy Court is a big plus, being largely in favor of shareholders. Creditors are due to submit ITD to announce the results of the final restructuring by 21 June.
The company"s back log has increased to Bt 51 billion Baht from Bt 37 Billion Baht at the end of 2000, well sufficient to last 2 years. With indications of a pick-up in construction activities (as evident in the strong domestic demand for cement), I much believe ITD"s back log book can grow even further.
I agree with other analysts that ITD deserves a premium rating for being Thailand"s largest contractor and an established regional player.***
I am sorry I have not been able to send you directly an e-mail alerting you to this important update but the software is acting up and for now it will not work.
ONE OF AMERICA"S BIGGEST DOMESTIC PROBLEM.
Here is a series of very current US observations. I plan sharing more with you on this theme, over the next few weeks.
1) The US has more overweight people then just about any Nation on earth.
2) In 1970 Americans spend about 6 Bill US$ on fast food, in year 2001 this is now 110 Bill $. *
3) USA consumers spend more on fast food than on higher education, personal computers, computer software, yes even more then on new cars! *
4) They spend more on movies, books, magazines, newspapers, videos and recorded music, combined! McDonald’s is annually hires about one million people, more than any other US organization, private of public. *
5) American school children can now identify Ron McDonald more ofen then even Santa and the Gold Arches of McDonalds are more widely recognized than the Christian cross. *
These * dark facts come from the new book "Fast Food Nation", by Eric Schlosser. The dark side of the all American meal. 2002.
The US is indulging in fast food -all year around- far more then the world is indulging in the World Cup fever, currently. There is an obsession to eating in USA Just as there is an obsession with franchises, as almost every facet of American life has been franchised. A person in USA can now go from craddle to grave, all on being served by franchises. 
and it may come from a void in other areas. What are they missing?
I plan to explore this engrossing & timely issue more here, as times goes by. USA is important to the world as it dominates in many "in vogue" themes.
The US is in the doldrums, economically and socially. And most executive compensation, is nothing short of outrageous. Not to mention the many questionable accounting practices. Does eating or franchising diet, make a Nation?
US Pride aside, lets face it: "Fortress America" is over, for now.
Very Best Regards to all members,
Paul A. Renaud.
