Three new growth stocks for this year and next.
Three new stocks I now would consider adding to a rational longer term Thai growth & dividend portfolio.
Three stocks which are just now on my radar screen are UKEM , XD (1.97), Salee XD (3.16) and GC, XD (2.90).
As noted, all three just recently went XD. (i.e. Dividends already allocated to shareholders). UKEM was previously reviewed where I turned more cautious at higher prices due to an expected shortfall in earnings for the first part of 2007.
On this earnings shortfall (for special one time reasons) any stock weakness (as is currently present with this choice well below 2 Baht) should be viewed now as a buying opportunity.
Hence currently I take UKEM back with a renewed view of “accumulate on current weakness” view. Members will remember that at a higher UKEM price I previously felt DEMCO was the better choice.
Demco moved up and UKEM down -and now is the time to consider UKEM again, but not at the expense of DEMCO which I still would rate with a rather favorable view. SALEE is a new choice of a company I consider in a desirable industry. Its another MAI listed selection on a high growth path. Similar toUKEM, the 1 Q earnings will show some initial stagness and so investors migh wrongly conclude the company is stalling.
But make no mistake UKEM as well as SALEE should have very solid growth in earnings for the whole year 2007. I expect SALEE to earn around 75 million Baht this year, which would be some 130% increase over last year. Post Private placement dilution, I think Salee can earn some 0.40 Baht per share in 2007, up from 0.23 last year. At the current price of around 3.12 the 2007 p/e is a rather cheap 7-8. I consider this undemanding as Salee appears to be a company on a fast growth track for the foreseeable future.
The company was listed on the MAI on April 28 2005 at 2.89 Baht per share. You can see Salee’s web site at: www.saleeind.com You can read about Salee’s business at this SET link, as the selling memorandum is shown there in English. http://www.set.or.th/set/companyinfo.do?type=profile&symbol=salee&language=en&country=US
Salee is moving its factory and planning vast expansion, its not yet producing at full capacity with some new higher margin products. Hence the first Quarter earnings 2007 will give a distorted picture of "no growth". But make no mistake, the cost per piece is decreasing and there is a broader product base in place -and Salee got two new substantial customers with a rather high required minimum order rate. Hence earnings are expected to soar up as this year progresses.
There just was a private placement (PP) for 37 million shares at 2.56 per share, or raising 95 million Baht which was injected into the company on April 2 ’07. This has reduced the company’s debt ratio’s and allows for the current rather rapid expected expansion over the next 1-2 years. It will also dillute EPS by some 18% as there now are more shares outstanding. As you know, I for some time favor select MAI listed growth stocks -and SALEE’s industry.
On the current price correction Salee seems to offer high growth at a reasonable p/e in the single digit. I would rate SALEE as a “long term buy” but realizing that the first quarter might disappoint some lesser informed investors. For this reason I perhaps should rate the same as I do UKEM with of “accumulate on current weakness”. But my sense is investors have already discounted this (as they may have with UKEM) and so the Salee as well as UKEM should hold at current levels. Salee as well as UKEM trade rather well, with rather large relative average volumes on most days. ***
As for GC (2.90), this company I just visitd in Bangkok last week. I was impressed and like the management and its business. They seem very pro shareholders and getting their story told to investors. I will shortly review this new selection separately. GC should see single digit growth in its earnings per share this year but solid growth next year. The stock traded with rather large volumes in recent weeks -but just lately stalled a bit.
GC listed on the 6th of December 2005 at 2.34 Baht per share on the SET’s Industry group of “Industrials, Petrochemicals & Chemicals”. I rate GC with a long term buy view which means no big rush to buy just now, but I do think by 2008 the stock could/should be nicely up in value. I will review GC at some lenght for members next month.
Best Regards,
Paul A. Renaud.
