170222_Morning Brief_E_20170222092647

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       22 February 2017   1   Morning Brief 22 February 2017   Morning Brief Daily Market Performance SET (21 / 02 / 2017): Market Turnover: 1,564.42 (-0.89%) Bt44,879m Source: SET, KS Today’s highlights Market Wrap-up ►   The SET Index closed down 14.05 pts, or 0.89%, at 1,564.42 on Tuesday. Retail investors bought a net Bt1,310.44mn, while institutional, proprietary and foreign investors were net sellers of Bt199.48mn, Bt451.95mn and Bt659.01mn worth of Thai shares, respectively. Strategy ►   Daily View (page 4)  The widening gap in returns between emerging and developed markets is drawing funds into markets with high EPS growth outlooks, whereas our coverage universe shows a gain of just 4.17% in YE2017E EPS. The SET thus looks set for an extended slide in the near term amid a lack of fresh inflows and trading catalysts. We maintain our strategy of letting the profits run in KKP, KTB, LH, SPCG and GLOW on their expected strong dividends; and in MEGA, CHG, TKN and PTTEP on their attractive upsides. Sector & Equities Recommendation ►   Banking Sector (Overweight) - Repayments led to loan contraction in Jan (page 5)  Overall loan growth in January dropped by 0.9% MoM (+0.5%  YoY) mainly on loan repayments across all segments after the high season for loans in 4Q16. We expect loan growth to pick up later in the year and estimate loan growth of 5% YoY for 2017. Competition for deposits in January remained benign with deposits contracting by 0.2% MoM (+0.4% YoY), but loans contracted and resulted in LDR falling to 92.0% from 92.6% in December.   ►   TASCO (Neutral) - Hedging policy provides support (page 6)  We upgrade TASCO to Neutral from Underperform and raise our 2017 target price to Bt25.0 (from Bt14.4) as we revise up our 2017/18 earnings estimates by 40.4%/83.1%. The earnings upgrade reflects a better-than-expected regional asphalt selling price that recovered faster than our previous forecast and increased confidence in the company ’s  strategy to cope with a crude oil price uptrend. Our concern that GPM could be negatively affected by rising oil prices has eased after the company hedged its long crude oil positions to around 50% of its total crude cost in 2017. We believe the company will continue this strategy in 2018. The company is also conducting a feasibility study on doubling its refinery capacity to 60 KBD, which will be considered at its 2018 AGM.   ►   EGCO (Outperform) - 4Q16 Review  –  Earnings beat our estimate (page 7)  4Q16 core profit of Bt2.08bn jumped 52.5% YoY, fell 25.3% QoQ. The result is 60% ahead of consensus estimates of Bt1.30bn. The YoY growth was mainly due to 1) a higher gross profit of Bt680mn from a full quarter of operation after COD of KN4 (gas, 930 MWe) in late June 2016, which replaced KN2-3 (gas, 748 MWe); 2) a 10.6% increase in share of profit from associates and JVs owing to a higher contribution of SEG (geothermal, 45 MWe) in Indonesia after it obtained a 40% increase in tariff in late June 2016; and 3) lower SG&A expense by Bt192mn. The QoQ decline was due mainly to a Bt384mn increase in SG&A expense and a lower share of profit from associates and JVs, mainly from a full availability payment of BLCP and KK2. 4Q16 net profit was reported at Bt827mn, a decline of 46.3% YoY and 71% QoQ. This was due to a FX loss of Bt1.17bn on EGCO’s USD loans.   Sector PER (x)  Yr to Dec 14A 15A 16E 17E  Agribusiness & Food 42.04 45.93 37.16 32.88 Commerce 38.01 35.18 32.21 26.26 Commercial 33.17 30.75 26.05 24.72 Construction Materials 13.48 13.26 11.61 13.14 Contractor 13.79 21.72 26.75 35.93 Electronics 19.36 16.58 17.70 15.50 Energy 23.46 140.11 13.37 11.40 ICT 13.29 10.81 21.97 29.47 Industrial Estate 11.24 16.90 23.15 28.26 Petrochemical 52.21 16.14 11.44 12.32 Residential 9.36 9.68 10.16 9.76 Transportation 298.41 42.53 24.79 25.10 Utilities 10.71 17.01 15.28 14.02 Source: Bloomberg, KS Inside Page Fund Flows i Bond Trading i Top Ten Short Sale ii Thai NVDR Trading Data by Stock ii Daily Driver Stats (Market Summary) iii Daily Driver Stats (Commodity) iv Director Trade v Insider Trading vi Foreign Ownership - top ten gainers and losers vi Economic Calendar vii Company's Calendar ix   Kasikorn Securities PCL Research Department Contact: 02-696-0031 SET Index1,564.42  Investor TypeSETTFEX  Top BuyNetTop SellNet  DJIA118.95pt/0.58% Oil - Nymex (USD)54.06/bbl/0.66USD Change-14.05pt/-0.89%(Btm)SCB186 ADVANC-342 S&P14.22pt/0.6% Gold - London (USD)1,229.24/Oz/-6.53USD Turnover (Btm)44,878.82 Foreign-659-1,956PTTGC119 AOT-148 NASDAX27.37pt/0.47% DXYO101.37/0.42% PER (x)18.31 Institution-1991,813IVL111 JAS-142 CAC23.77pt/0.49% Bt/USD35.04/0.03% PBV (x)1.96 Retail1,310143SCC84 KBANK-123 FTSE-25.03pt/-0.34% USD/Euro1.05/-0.76% Div Yield (%)2.93 Proprietary-452-CPALL73 INTUCH-121 DAX139.87pt/1.18% 10Y US treasury yld2.43/0.59% (Contracts) Thai Stock MarketTrading by Investor TypeNVDR Net Buy/SellInternational MarketsCommodity Market    Morning Brief Sector & Equities Recommendation ►   ERW (Neutral) - Earnings Review: Better than expectations (page 8)  Greater-than-expected 2016 earnings due to HOP INN. ERW reported 2016 earnings of Bt367 mn, up 87.7% YoY due to the increase of 6.1% YoY in revenue from hotel business and better gross margin from hotel business of 41.2% vs 38.4% in 2015. 2016 earnings is better than our forecast of Bt287 mn. ERW posted 4Q16 earnings of Bt103 mn, flat YoY but up 84.8% QoQ due to the rise of 3.6% QoQ in revenue from hotel business and strong gross margin from hotel business of 42% vs 40% in 3Q16. The impressive earnings was driven by revenue from HOP INN  — budget hotel. In 4Q16, ERW opened additional 2 HOP INNs at Hat Yai and Phuket in the quarter. Totally, ERW has 22 HOP INNs.   ►   MAKRO (Neutral) - Earnings Review: 4Q16 net profit beats expectations on strong revenue (page 9)  4Q16 NP beat our forecast. MAKRO reported a 4Q16 net profit of Bt1,618mn, up 13.6% YoY and 14.9% QoO. This was 13.7% above our forecast of Bt1,361mn and 14.9% above the Bloomberg consensus estimate of Bt1,301mn, due mainly to 7.6% higher-than-expected revenue. MAKRO’s 2016 earnings came in at Bt5.4 bn, up 0.6% YoY, while 2016 SSSG improved to 4.1% from -0.6% in 2015.   ►   SAWAD (Outperform) - 4Q16 Review: Record-high earnings for the 10 th  consecutive quarter (page 10)  SAWAD reported a 4Q16 net profit of Bt610mn, up 53.5% YoY and 12.1% QoQ. The result exceeded our forecast by 7% and consensus by 8%. The earnings beat was mainly on lower-than-expected provisions, while non-interest income was lower than expected but offset by slightly lower-than-expected OPEX. Factors behind the strong YoY growth were strong loan growth, higher non-NII, and lower provisions. Factors behind the strong QoQ earnings growth were strong loan growth, a higher NIM, and lower provisions. Asset quality strengthened better than we expected but the coverage ratio was lower than expected which we believe could put pressure on the stock’s performance . Full-year earnings totaled Bt2.0bn, up 50% YoY. The number is in line with our forecast but 6% higher than consensus. ►   SPALI (Outperform) - 4Q16 Review: Earnings just below our expectation, in line with market (page 11)  4Q16 earnings fall 17.1% YoY, surge 42.4% QoQ to Bt1.21bn. This was 7.7% lower than our forecast of Bt1.31bn but in line with Bloomberg’s consensus estimate  of Bt1.17bn. A slight decline in sales revenue and higher SG&A expenses were the major factors behind the YoY decrease, while strong revenue growth and a drop in the SG&A-to-sales ratio (reflecting a fuller benefit from economies of scale) boosted QoQ growth. As a result, full-year earnings rose to Bt4.89bn, up 12.4% YoY.   ►   BCP (Neutral) - Outlook for 2017 less than inspiring (page 12)  Reiterate Neutral with target price of Bt32.5: Our rating is premised on a lack of upside to our YE2017 target price and flattish earnings outlook for 1Q17. Additionally, we expect a stream of earnings downgrades for FY2018 from the market (Bloomberg consensus estimate is Bt5.8bn for FY2018). However, BCP is among the cheapest of the five Thai petrochemical refinery stocks under our coverage in terms of PBV, trading at 1.05x versus 1.21x PBV for its peers. Therefore, we maintain a Neutral rating on BCP and a target price of Bt32.5, which is a sum-of-the-parts valuation.   ►   BCPG (Neutral) - Construction delays imply a negative 2017 outlook (page 13)  We maintain our Neutral rating with a target price of Bt13.7, as potential 2017 earnings downside would have a limited impact on our TP. BCPG also has potential upside from the acquisition of a wind farm in the Philippines (36 MW).      22 February 2017   3   Morning Brief ►   STEC (Outperform) - Investment in Japanese solar farm agreed with TSE (page 14)  We maintain our Outperform rating on STEC with a 2017 target price of Bt33.00, based on a PBV multiple of 4.8x, or 1.5SD above its historical mean. There is not yet sufficient information to estimate the potential incremental value from the project to STEC.  
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