Market Talk

July 23, 2015

Investment Strategy
SET Index may show only a short-term rebound as suppressed by listed companies earnings forecast cuts
as a result of the economic slowdown. The market EPS growth after the second round of cut would be B92
and a new Index target at the end of 2015 would be 1,427 pts. We still recommend single stocks that have
immunity from the slowing economy, e.g. THCOM(FV@B51) and BTS(FV@B12); top pick is
IRPC(FV@B5.8).
SET Index
Change
Market cap (Bm)

1,447.84
0.40
39,970.26

Net buy and sell by investor type (Bm)

Foreign
Proprietary Trading
Institution
Retail

-2,303.43
-720.56
601.30
2,422.69

End-2015 SET Index Target

PER (3456)
14.0x
14.5x
15.0x
15.5x
16.0x
16.5x
17.0x

O c t 58E
15 E
7.8. 58E 9.8. 58E 7.:. 58E ;.8.
1,227
1,249
1,271
1,293
1,271
1,294
1,316
1,339
1,314
1,338
1,361
1,385
1,358
1,383
1,407
1,431
1,402
1,427
1,452
1,478
1,446
1,472
1,498
1,524
1,490
1,517
1,543
1,570

P / E ra t io ( x) J u l 15 E A u g 15 E S e p 15 E

<.:. 58E =.8. 58E

1,315
1,337
1,361
1,385
1,408
1,432
1,455
1,480
1,502
1,528
1,549
1,576
1,596
1,623

N o v 15 E D e c 15 E

UK to raise policy rate same time as US

While the Greek debt issue has been depressing the European economy, the economy of the US and the UK has been
rebounding continuously. Although the UK's easing monetary policies (the 0.5% policy rate and the GBP375bn QE) has
been maintained because the inflation rate has been as low as 0% (due to GBP appreciation and low oil prices) and the
inflation rate has still stayed as high as 5.6% (first increase since January 2014), two out of nine committees believed that
the UK's economy has been stable, so the policy interest rate should be raised gradually near the end of the year.
Similarly, June U.S. existing home sales made an eight-and-a-half-year high of 5.49 million. The housing market has
continuously rebounded thanks to the strong labor market, low lending rate, and increasing personal wages. Therefore, Fed
might raise the policy interest rate gradually at the end of this year as the economy recovers continuously, which would be
good for U.S. stock markets that have moved sideway, reflecting projection on the interest rate hike.

TUF temporarily halts capital increase, depressing SET

SET Index has been depressed by not only the drought and lower export but also TUF's new issue. TUF has notified SET to
temporarily halt the capital increase for the acquisition of 100% shareholding in Bumble Bee at the cost of US$1.51bn
Porranee Thongyen, CISA because the acquisition may lead to TUF monopolizing U.S. tuna business. Following StarKist with the largest market share
License No: 004146
in the US of 35%, Bumble Bee currently owns the second largest market share of 28%, followed by Chicken of the Sea with
porranee@asiaplus.co.th
19% (TUF holds 100% stake) market share; these three companies seized over 50% of U.S. tuna industry now. The
Therdsak Thaveeteeratham
License No: 004132

therdsak@asiaplus.co.th
Pobchai Phatrawit
License No: 052647

pobchai@asiaplus.co.th

English research reports are a rough translation of our Thai-language

research products. It is produced primarily with time efficiency in mind, so
that English-reading clients can see what the main recommendations are
from our Thai-language research team. Given that this is a rough-and-ready
translation, Asia Plus Securities Company cannot be held responsible for
translation inaccuracies.

The Thai language research reports and information contained therein

are compiled from public data sources and our analysts' interviews
with executives of listed companies. They are presented for
informational purposes only and not to be deemed as solicitations to
buy or sell any securities. Best attempts have been made to verify
information from these vast sources, but we cannot guarantee their
accuracy, adequacy, completeness and timeliness. The analyses and
comments presented herein are opinions of our analysts and do not
necessarily reflect the views of Asia Plus Securities.

acquisition needs to be deliberated closely under the U.S. monopoly-prohibiting anti-trust law to ensure that it has no
adverse effects on rivals and consumers. In the worst-case scenario that TUF fails to acquire Bumble Bee, we may have to
use the former fair value of B22.75 (not including Bumble Bee, before the capital increase) or the current fair value of
B25.56. We recommend temporarily staying away from TUF for those who have not bought TUF yet; for those who already
have TUF in their portfolio, we recommend holding because the company's performance is still strong without Bumble Bee.

Purchasing power declines. Domestic car sales fall

Yesterday, the Federation of Thai Industries (FTI) lowered 2015 car production target by 0.1 to 2.05 million, mainly cutting
projection on car production for domestic sales to a rise of 9%yoy. Domestic purchasing power has declined. Newlyregistered passenger cars plummeted 22.1%yoy in June after falling 20.1%yoy in May, 1H15 domestic car sales dropped
16%yoy, and car export growth reversed from +16.3% in 1Q15 to -7.7% in 2Q15.
1H15 car production was 935,215, making up only 43.5% of the FTI's initial goal of 2.05 million. 2Q15 car production fell by
21%qoq as a result of long holiday and TOYOTA's new pick-up truck model that cause customers in Thailand and Middle
East and Australia (Thailand's major export markets) to buy fewer one-ton pick-up trucks from Thailand.
We project full-year car production at 1.95 million, growing 4%yoy (slightly lower than the FTI's goal), expecting the
auto sector's 2Q15 earnings to drop qoq and yoy due to the aforementioned factors (1Q15 profit made up 26.4% of
the full-year forecast). We maintain the auto sector's FY2015 earnings forecast at B4bn, rising 21%, but wait for
2Q15 earnings report before revising down our projection. We reiterate NEUTRAL. Top pick is SAT(FV@B22) that
directly benefits from new pick-up trucks models and increasing orders (parts for big trucks) in 3Q15.

Further down revision

The economy has been slowing down, depressing SET-listed companies' 2Q15 earnings and profitability further, so we
revise down FY2015-2016 forecasts of the following companies:
DTAC(FV@B85) I DTAC's 2Q15 net profit was lower than projected. Service revenue (excluding IC) fell due to decreasing
usage amidst the economic slowdown and fierce competition, while cost on network increased because the company has
invested in 3G concession that costs more than expected. No rebound is expected in 2H15 as well. Although DTAC's
strategy to use 10 MHz of bandwidth on the 1800 MHz spectrum to increase its 4G network bandwidth from 5 MHz (2.1
GHz) to 15 MHz would improve coverage, it would result in higher cost and negate the benefit. We revise down its earnings
forecast by 14.7% on average in 2015-2016, projecting its net profit to fall 35% to B7.0bn in 2015 and rise by only 4% in
2016.
GCAP(FV@B3.8) I The drought threaten farmers (GCAP's major customers), thus depressing agricultural loans severely.
The business diversification strategy (outside agricultural field) would not start until late 2015, so GCAP would not fully
benefit from this in 2015. We revise down GCAP's earnings forecast by 8.9% (5.0%yoy growth) in 2015 and 9.9%
(13.3%yoy growth) in 2016.
BJCHI(FV@B8.5) I We expect 2Q15 profit to fall 24%yoy because FPSOs P75&P77 projects have been delayed as a result
of the conflict about wage with the owner of the project. We revise down BJCHI's earnings forecast by 10% in 2015.
However, 2H15 profit is expected to grow remarkably owing to income from the delayed projects and other high-margin
projects. Result of bids for new projects will be announced late this year.
CHG(FV@B2.05) I CHG's 1H15 net profit is projected to make up only 44% of the full-year forecast due to low season, and
2Q15 profit is expected to slip 1.7%qoq. However, 2H15 profit would be strong thanks to extension of Chularat Hospital 11
2

and Chularat Hospital 9. We revise down its earnings forecast by 5.3% (16.5%yoy growth) in 2015 and 3.1% in 2016
(23.1%yoy growth).
Companies with 2Q15 forecast up revision
TOP (FV@B56) I We revise up 2015 profit forecast by 43% to reflect an increase of GRM assumption from US$5.5/barrel to
US$6.5/barrel. 2H15 profit may weaken from 1H15 because of a low season of the refinery business and new supplies from
India.
BCP (FV@B36) I We revise up 2015 profit forecast by 29.1% to reflect an increase of GRM assumption from US$6.5/barrel
to US$7.5/barrel. 2H15 profit would decrease significantly from 1H15 due to seasonal effect.
DRT (FV@B5.3) I We revise up 2015 profit forecast by 5% to reflect likely strong profit in 2Q15 as a result of the
companyLs product mix adjustment to high margin products, which would make 2Q15 gross margin stand above 25% for the
first time in the past four quarters.
THCOM (FV@B51) I THCOMLs net profit is projected to grow continuously by 30% to B2.1bn in 2015. Thaicom7's capacity
booking has already reached 100% and its utilization rate has exceeded the breakeven point of 50%, which means this
whole revenue will be counted as profit. Moreover, Thaicom8 is starting to provide service since 2Q16 and a mobile
business in Laos has been able to generate regular profit of not less than B150m a year.
The banking sector has just finished its earnings declaration, with a profit growth of 1.9%qoq and 1.8%yoy, which was 8%
better than expected, thanks to growing net interest income, NIM, and income from other operations and a lower-thanexpected increase in operating expense. However, asset quality was far worse than projected; bad debt reserve increased
more than projected because of continually increasing NPL and special mention loan (SML). NPL to total loans at end-2Q15
rose to 2.56% (from 2.48% in 1Q15) and, as a result of the increasing debt reserve, NPL coverage ratio at end-2Q15 rose
to 134.3% (from 133.6% in 1Q15). For 2H15 outlook, the banking sector would remain in a downtrend; NIM would shrink
significantly as a result of fast rising operating expense in a high season, while bad debt reserve expense would stay high.
We maintain our net profit forecast in 2015-2016, projecting FY2015 net profit to contract 5.4%yoy.

Foreigners reverse to sell in Asia

Yesterday, foreign investors sold in regional stock markets US$506m (after five-day net buy). Indonesia was with a net buy
of US$7m (after closing for four days), while other four countries faced net sell: South Korea of US$340m (second day),
Taiwan of US$100m (after five-day net buy), the Philippines of US$6m, and Thailand of US$66m or B2,303m (even though
SET Index rose by 0.4 pts or 0.3%). Local institutions bought at B601m net (after four-day net sell).
For the bond market, local institutions sold B3,033m net and foreign investors bought B296m net. THB recently made a sixyear low at B34.70/US$.

Monthly Foreign Fund Flow in Asia

Month
January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
Unit: Million US$

Indonesia
19
830
-413
448
-264
-307
31

Philippines
529
372
167
-203
-201
-258
-88

S. Korea
-1,033
1,166
2,487
3,966
1,748
-971
-991

Taiwan
2,143
3,199
-1,114
3,512
1,158
-2,619
-916

Thailand
-128
-213
84
7
94
-311
-527

Total
1,530
5,354
1,211
7,729
2,535
-4,467
-2,491
3

Stocks Recommended in Market Talk

Stocks

Start
Date

THCOM

09-Jul-15

TUF

IRPC

Price

PER
2558F

Weight

Start

Last

Accumulated
Return

51.00

15%

35.75

35.25

-1.4%

18.58

2.12

2.42

11-May-15

25.56

10%

20.11

20.00

-0.5%

18.73

1.88

2.67

21-May-15

5.80

14%

4.26

4.34

1.9%

8.89

1.14

2.30

Fair Value

PBV
2558F

Dividend
Yield

Strategist Comment

30-Min Chart

Slightly affected by sluggish economy.

Continuously strong growth for the rest of 2015.
Temporarily excluded from portfolio as the company
suspended Bumble Bee acquisition plan.
Share price substantially absorbed negative factor.
Potential strong profit in 2015-2016
from Phoenix project.
Benefiting from weak THB.

HANA

03-Jun-15

48.00

10%

43.25

32.25

-25.4%

9.78

1.32

5.43

RCL

19-Jun-15

12.00

15%

10.80

8.90

-17.6%

24.59

0.74

0.93

TASCO

22-Jun-15

27.50

15%

20.60

23.30

13.1%

8.47

3.56

3.22

Lowest P/E among peers, high dividend yield.

0.83x PBV ratio, far below average.
Significant turnaround from low oil price.
Possibly strong growth in 2Q15-3Q15

Earnings forecast revised up by 44%

Potential winner for government project bids.

CK

15-Jun-15

31.25

12%

27.00

26.25

-2.8%

15.69

2.08

1.90

Strong profit expected in 2Q15.

Ready to operate/build North, South Green Lines,

BTS

10-Jul-15

12.00

9%

10.00

10.10

1.0%

49.98

2.66

6.65

positive sentiment, high dividend yield

Temporarily exclude TUF from portfolio and increase investment in BTS and IRPC by 5% each. TUF suspended its capital raising plan, waiting for explanation from the US about Bumble Bee acquistion.

Accumulated contribution returns since beginning of the year

Accumulated returns since our recommendation

-3.0%

-25.4%

RCL

-1.9%
-1.4%
-1.4%
-1.2%
-0.7%
-0.5%
-0.5%
-0.4%
-0.4%
-0.4%
-0.1%
-0.1%

-17.6%

TUF

-0.5%

CK

-2.8%

THCOM

BTS

1.0%

IRPC

1.9%

TASCO

13.1%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2.6%
2.9%
3.0%

20%

5.7%
-4%

Accumulated returns
Port
12%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Accumulated returns since beginning of the year

SET

Port

10.63%

SET

20%

10%
8%

15%

6%
4%

10%
1.14%

2%

0.03%

0%

5%

-2%
-3.33%

-6%

0%

-3.77%
-5.51%

6-Jul-15

20-Jul-15

8-Jun-15

22-Jun-15

25-May-15

27-Apr-15

11-May-15

13-Apr-15

30-Mar-15

-1D

2-Mar-15

MTD

16-Mar-15

YTD

2-Feb-15

-5%

-8%

16-Feb-15

-4%

5-Jan-15

-30%

0.0%
0.1%
0.1%
0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
1.0%
1.2%
1.6%

-1.4%

19-Jan-15

HANA