Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<p><strong>Amid the COVID-19 crisis and facing a hard hit from crude price downfall PTTEP targets petroleum sales growth at 6% CAGR in next 5 years. The company rolled out 5-year investment plan allocating US$23.6bn aiming long term growth.</strong></p><div>• PTTEP rolled out an investment plan of US$23.6bn (US$14.0bn CAPEX and US$8.7bn OPEX) to maintain the production from existing projects and accelerating key development projects aiming long term growth.</div><div></div><div>• The company foresee  decommissioning expense of US$686m in 2022 on developing G1/61 (Erawan)and G2/61 (Bangkot)projects. Though this will only impacts the cash outflow but not the earnings, on a worst case scenario we estimate the impact to our target price is Bt4.5/sh (4.0% of our DCF based TP).</div><p></p><p>Given a minimal impact to our earnings forecast (&lt;3.0%) from sales volume adjustment, we maintain target price and  BUY recommendation. Our target price of Bt108.0 is derived using DCF methodology  (WACC 9.5% and TG 2%). Our valuation implies 13.2x PE’21</p>

Amid the COVID-19 crisis and facing a hard hit from crude price downfall PTTEP targets petroleum sales growth at 6% CAGR in next 5 years. The company rolled out 5-year investment plan allocating US$23.6bn aiming long term growth.• PTTEP rolled out an investment plan of US$23.6bn (US$14.0bn CAPEX and US$8.7bn OPEX) to maintain the production from existing projects and accelerating key development projects aiming long term growth.• The company foresee  decommissioning expense of US$686m in 2022 on developing G1/61 (Erawan)and G2/61 (Bangkot)projects. Though this will only impacts the cash outflow but not the earnings, on a worst case scenario we estimate the impact to our target price is Bt4.5/sh (4.0% of our DCF based TP).Given a minimal impact to our earnings forecast (&lt;3.0%) from sales volume adjustment, we maintain target price and  BUY recommendation. Our target price of Bt108.0 is derived using DCF methodology  (WACC 9.5% and TG 2%). Our valuation implies 13.2x PE’21

PTTEP: Target to Achieve 6% CAGR Sales Growth in 2021-25

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<div class="content-highlight">
<p>The week that was in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a> is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.</p>
<p>We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets.  </p>
</div><h3>Macro Insights</h3><p>In <a href="https://www.smartkarma.com/insights/agong-asserts-himself-preventing-change-of-pm-but-disallowing-emergency-rule" target="_blank" data-smartkarma-citation="insights:44572" rel="noopener">Agong Asserts Himself, Preventing Change of PM but Disallowing Emergency Rule,</a> CrossASEAN Chief Economist <a href="https://www.smartkarma.com/profiles/prasenjit-k-basu" target="_blank" data-smartkarma-citation="accounts:612" rel="noopener">Prasenjit K. Basu</a> comments on the ongoing political upheaval in Malaysia. </p><p>In <a href="https://www.smartkarma.com/insights/trouble-down-south-it-s-not-just-the-virus" target="_blank" data-smartkarma-citation="insights:44698" rel="noopener">Trouble Down South: It's Not Just the Virus,</a><a href="https://www.smartkarma.com/profiles/dr-jim-walker" target="_blank" data-smartkarma-citation="accounts:1628" rel="noopener">Dr. Jim Walker</a> gives his prescriptions on why South East Asia has been such a poor performer this year. </p><p>In <a href="https://www.smartkarma.com/insights/thai-strategy-2021-part-1-key-themes" target="_blank" data-smartkarma-citation="insights:40842" rel="noopener">Thai Strategy 2021 (Part 1): Key Themes,</a> out Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> lays out his thoughts for the outlook for the Thai market next year. </p><h3>Equity Bottom-Up Insights</h3><p>In his Indonesian Insight, <a href="https://www.smartkarma.com/insights/matahari-department-store-lppf-ij-too-early-to-be-early" target="_blank" data-smartkarma-citation="insights:44460" rel="noopener">Matahari Department Store (LPPF IJ) - Too Early to Be Early,</a> Cross ASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> circles back to the country's largest department store operator post its recent results. </p><p>In <a href="https://www.smartkarma.com/insights/akr-corporindo-akra-ij-great-omnibus-expectations" target="_blank" data-smartkarma-citation="insights:44611" rel="noopener">AKR Corporindo (AKRA IJ) - Great Omnibus Expectations,</a> CrossASEAN insight provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" rel="noopener">Angus Mackintosh</a> revisits <a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" rel="noopener">AKR Corporindo (AKRA IJ)</a> after its recent 3Q2020 results that continued to demonstrate its resilience, with an across the board improvement in margins, despite a decline in sales.</p><p>In a Malaysian Insight, <a href="https://www.smartkarma.com/insights/ql-resources-ql-take-profit" target="_blank" data-smartkarma-citation="insights:44598" rel="noopener">QL Resources (QL): Take Profit?,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/henry-soediarko" target="_blank" data-smartkarma-citation="accounts:1006" rel="noopener">Henry Soediarko</a> revisits this commodity turned retail play, through its Family Mart business. </p><p>In <a href="https://www.smartkarma.com/insights/far-east-hospitality-trust-feht-beneficiary-of-opening-up" target="_blank" data-smartkarma-citation="insights:44649" rel="noopener">Far East Hospitality Trust (FEHT): Beneficiary of Opening Up,</a> CrossASEAN Insight Provider<a href="https://www.smartkarma.com/profiles/henry-soediarko" target="_blank" rel="noopener"> Henry Soediarko</a> takes an initial look at<a href="https://www.smartkarma.com/entities/far-east-hospitality-trust" target="_blank" rel="noopener"> Far East Hospitality Trust (FEHT SP),</a> the only hospitality REIT in Singapore with a 100% domestic hospitality exposure and a higher fixed rental component, offering a defensive exposure during this difficult market environment. </p><p>In <a href="https://www.smartkarma.com/insights/bca-profit-returns" target="_blank" data-smartkarma-citation="insights:44605" rel="noopener">BCA – Profit Returns,</a> banking specialist <a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> revisits <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a> and finds the bank clawing back some of the ROA it lost during 2Q2020 in the most recent quarter. </p><p>In <a href="https://www.smartkarma.com/insights/bts-potential-positive-catalysts-ahead" target="_blank" data-smartkarma-citation="insights:44691" rel="noopener">BTS: Potential Positive Catalysts Ahead,</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> revisit this Thai transportation play with a more positive slant.</p><p>In <a href="https://www.smartkarma.com/insights/pttep-4q20-earnings-to-soften-from-lower-asp-and-volume-sales" target="_blank" data-smartkarma-citation="insights:44740" rel="noopener">PTTEP: 4Q20 Earnings to Soften from Lower ASP and Volume Sales,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> assess the prospects for <a href="https://www.smartkarma.com/entities/ptt-exploration-and-production-public-company-limited" target="_blank" data-smartkarma-citation="entities:261:1" rel="noopener">PTT E&amp;P (PTTEP TB)</a> going into the end of the year.</p><h3>Credit Insights</h3><p>In this Insight, <a href="https://www.smartkarma.com/insights/japfa-comfeed-earnings-flash-9m-fy-2020-results-lucror-analytics" target="_blank" data-smartkarma-citation="insights:44743" rel="noopener">Japfa Comfeed - Earnings Flash - 9M FY 2020 Results,</a> Senior Credit Analyst<a href="https://www.smartkarma.com/profiles/trung-nguyen" target="_blank" rel="noopener"> Trung Nguyen</a> discusses <a href="https://www.smartkarma.com/entities/japfa-comfeed-indonesia-tbk-pt" target="_blank" data-smartkarma-citation="entities:8258:1" rel="noopener">Japfa Comfeed Indonesia (JPFA IJ)'</a>s 9M2020 results, which came in worse than expected (following a dismal Q22020), as the impact of COVID-19 reduced consumers' purchasing power and hit demand. </p><p>In <a href="https://www.smartkarma.com/insights/pan-brothers-earnings-flash-9m-fy-2020-results-lucror-analytics" target="_blank" data-smartkarma-citation="insights:44708" rel="noopener">Pan Brothers - Earnings Flash - 9M FY 2020 Results,</a><a href="https://www.smartkarma.com/companies/lucror-analytics" target="_blank" rel="noopener">Lucror Analytics</a> zeros in on the Pan Brothers’ Q3 and 9M2020 earnings. Pan Brothers’ cash flow generation remained poor, and it continued to report large working capital weakness. It appears unlikely that Pan Brothers will be able to increase the size of its syndication facility, given the low commitment from banks at the moment. </p>


The week that was in ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.
We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets.  
Macro InsightsIn Agong Asserts Himself, Preventing Change of PM but Disallowing Emergency Rule, CrossASEAN Chief Economist Prasenjit K. Basu comments on the ongoing political upheaval in Malaysia. In Trouble Down South: It's Not Just the Virus,Dr. Jim Walker gives his prescriptions on why South East Asia has been such a poor performer this year. In Thai Strategy 2021 (Part 1): Key Themes, out Thai guru Athaporn Arayasantiparb, CFA lays out his thoughts for the outlook for the Thai market next year. Equity Bottom-Up InsightsIn his Indonesian Insight, Matahari Department Store (LPPF IJ) - Too Early to Be Early, Cross ASEAN Insight Provider Angus Mackintosh circles back to the country's largest department store operator post its recent results. In AKR Corporindo (AKRA IJ) - Great Omnibus Expectations, CrossASEAN insight provider Angus Mackintosh revisits AKR Corporindo (AKRA IJ) after its recent 3Q2020 results that continued to demonstrate its resilience, with an across the board improvement in margins, despite a decline in sales.In a Malaysian Insight, QL Resources (QL): Take Profit?, CrossASEAN Insight Provider Henry Soediarko revisits this commodity turned retail play, through its Family Mart business. In Far East Hospitality Trust (FEHT): Beneficiary of Opening Up, CrossASEAN Insight Provider Henry Soediarko takes an initial look at Far East Hospitality Trust (FEHT SP), the only hospitality REIT in Singapore with a 100% domestic hospitality exposure and a higher fixed rental component, offering a defensive exposure during this difficult market environment. In BCA – Profit Returns, banking specialist Daniel Tabbush revisits Bank Central Asia (BBCA IJ) and finds the bank clawing back some of the ROA it lost during 2Q2020 in the most recent quarter. In BTS: Potential Positive Catalysts Ahead,Country Group revisit this Thai transportation play with a more positive slant.In PTTEP: 4Q20 Earnings to Soften from Lower ASP and Volume Sales, our friends at Country Group assess the prospects for PTT E&amp;P (PTTEP TB) going into the end of the year.Credit InsightsIn this Insight, Japfa Comfeed - Earnings Flash - 9M FY 2020 Results, Senior Credit Analyst Trung Nguyen discusses Japfa Comfeed Indonesia (JPFA IJ)'s 9M2020 results, which came in worse than expected (following a dismal Q22020), as the impact of COVID-19 reduced consumers' purchasing power and hit demand. In Pan Brothers - Earnings Flash - 9M FY 2020 Results,Lucror Analytics zeros in on the Pan Brothers’ Q3 and 9M2020 earnings. Pan Brothers’ cash flow generation remained poor, and it continued to report large working capital weakness. It appears unlikely that Pan Brothers will be able to increase the size of its syndication facility, given the low commitment from banks at the moment. 

The Week that Was in ASEAN@Smartkarma - South East Asia Lags, the Bank's Return, and Nimble Staples

<p><strong>Yesterday analyst meeting came out in a neutral tone. We maintain our BUY  recommendation based on a target price of Bt108 derived from DCF methodology (WACC 9.5% and TG 2%). Our valuation implies 13.3x PE’21.</strong></p><ul>
<li>PTTEP reported 3Q20 net profit of Bt7.2bn (-35%YoY, +67%QoQ), improving QoQ on the back of increased volume sales and average selling price (ASP).</li>
<li>Expect 4Q20 earnings to soften both YoY and QoQ , due to drop in ASP as the gas price is expected to decline by 13% to US$5.4/MMBTU (from 6.2 US/MMBTU in 3Q20)</li>
<li>We expect a 10% downside risk in our earnings forecast for 2021-22 period, as we anticipate  8 to 10% drop in PTTEP’s volume sales (from previous guidance) due to global oil demand destruction amid COVID-19 induced economic slowdown.</li>
<li>Thus we recommend trading and gradually accumulate the stock beginning 1Q21.</li>
</ul>

Yesterday analyst meeting came out in a neutral tone. We maintain our BUY  recommendation based on a target price of Bt108 derived from DCF methodology (WACC 9.5% and TG 2%). Our valuation implies 13.3x PE’21.
PTTEP reported 3Q20 net profit of Bt7.2bn (-35%YoY, +67%QoQ), improving QoQ on the back of increased volume sales and average selling price (ASP).
Expect 4Q20 earnings to soften both YoY and QoQ , due to drop in ASP as the gas price is expected to decline by 13% to US$5.4/MMBTU (from 6.2 US/MMBTU in 3Q20)
We expect a 10% downside risk in our earnings forecast for 2021-22 period, as we anticipate  8 to 10% drop in PTTEP’s volume sales (from previous guidance) due to global oil demand destruction amid COVID-19 induced economic slowdown.
Thus we recommend trading and gradually accumulate the stock beginning 1Q21.


PTTEP: 4Q20 Earnings to Soften from Lower ASP and Volume Sales

<p><strong>We expect PTTEP to report 3Q20 net profit of Bt5.7bn (-48% YoY, +33% QoQ) on the back of recovering volume sales and average selling price (ASP) which bottomed out in 2Q20.</strong></p><ul>
<li>The average selling price (ASP) should be at 38.7 US$/BBL (-16% YoY, +10 QoQ), and expect the volume sales increase to 340 kBD (-4% YoY, +4% QoQ).</li>
<li>We expect the Dubai crude oil price to average at 40-43 US$/BBL during 4Q20 and rise to 50 US$/BBL level in 2021.</li>
</ul><p><strong>We maintain our BUY  recommendation based on target price of Bt108, derived from DCF methodology (WACC 9.5% and TG 2%). Our valuation implies 13.3x PE’21.</strong></p>

We expect PTTEP to report 3Q20 net profit of Bt5.7bn (-48% YoY, +33% QoQ) on the back of recovering volume sales and average selling price (ASP) which bottomed out in 2Q20.
The average selling price (ASP) should be at 38.7 US$/BBL (-16% YoY, +10 QoQ), and expect the volume sales increase to 340 kBD (-4% YoY, +4% QoQ).
We expect the Dubai crude oil price to average at 40-43 US$/BBL during 4Q20 and rise to 50 US$/BBL level in 2021.
We maintain our BUY  recommendation based on target price of Bt108, derived from DCF methodology (WACC 9.5% and TG 2%). Our valuation implies 13.3x PE’21.

PTTEP: Recouping Crude Price to Drive 3Q20 Earnings

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

<p>Events half the world away have a way of sending ripple effects on Thai equities. In this review, we examine five such events and their impact:</p><ul>
<li>
<strong>Trump targets Chinese tech. </strong>Trump's recent targeting of Tik Tok and WeChat is the opening salvo in a new type of trade war. Electronics companies stand to benefit from new businesses, as China uses Thailand as an alternate route for US bound products. In telecoms, Thais are likely to buy more iPhone due to the American dominance in the app domain.</li>
<li>
<strong>Lebanon's unrest </strong>spun out of control faster than initially expected. If it ends up disrupting the oil supply chain, it could provide a silver lining to PTTEP which benefits from high oil prices, though we believe this impact to be short term.</li>
<li>
<strong>Flood disaster </strong>spread to Northeastern and Southern Thailand after the long draught, which should bolster rubber and rice prices. Reconstruction stocks such as DCC, Siam Cement, and TASCO will in the spotlight as the flood subsides.</li>
<li>
<strong>COVID-19 update. </strong>Russia's vaccine is the biggest positive catalyst on this front, even as new outbreaks show up in Japan, Vietnam, and Korea.</li>
<li>
<strong>Kamala Harris nomination </strong>will boost Biden's lead in California and amongst minorities but could cost the Democrats Pennsylvannia given her anti-fracking stance.</li>
</ul>

Events half the world away have a way of sending ripple effects on Thai equities. In this review, we examine five such events and their impact:

Trump targets Chinese tech. Trump's recent targeting of Tik Tok and WeChat is the opening salvo in a new type of trade war. Electronics companies stand to benefit from new businesses, as China uses Thailand as an alternate route for US bound products. In telecoms, Thais are likely to buy more iPhone due to the American dominance in the app domain.

Lebanon's unrest spun out of control faster than initially expected. If it ends up disrupting the oil supply chain, it could provide a silver lining to PTTEP which benefits from high oil prices, though we believe this impact to be short term.

Flood disaster spread to Northeastern and Southern Thailand after the long draught, which should bolster rubber and rice prices. Reconstruction stocks such as DCC, Siam Cement, and TASCO will in the spotlight as the flood subsides.

COVID-19 update. Russia's vaccine is the biggest positive catalyst on this front, even as new outbreaks show up in Japan, Vietnam, and Korea.

Kamala Harris nomination will boost Biden's lead in California and amongst minorities but could cost the Democrats Pennsylvannia given her anti-fracking stance.


Thai Macro Watch (August): The New Tech Wars, Chinese Flood

Thailand

PTT Exploration and Production Public Company Limited explores for crude oil and natural gas, develops fields for production, and produces oil and natural gas. The Company is a subsidiary of the Petroleum Authority of Thailand.

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PTT E&P (PTTEP TB)

PTTEP: Target to Achieve 6% CAGR Sales Growth in 2021-25

Amid the COVID-19 crisis and facing a hard hit from crude price downfall PTTEP targets petroleum sales growth at 6% CAGR in next 5 years.

Pi Securities PCL, Thailand

The Week that Was in ASEAN@Smartkarma - South East Asia Lags, the Bank's Return, and Nimble Staples

The Week that Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights from across South East...

Angus Mackintosh

PTTEP: 4Q20 Earnings to Soften from Lower ASP and Volume Sales

Yesterday analyst meeting came out in a neutral tone. 4Q20 earnings to soften from lower ASP and volume sales. We maintain our BUY ...

Pi Securities PCL, Thailand

PTTEP: Recouping Crude Price to Drive 3Q20 Earnings

We expect PTTEP to report 3Q20 net profit of Bt5.7bn (-48% YoY, +33% QoQ) on the back of recovering volume sales and average selling price (ASP)...

Pi Securities PCL, Thailand

Thai Macro Watch (August): The New Tech Wars, Chinese Flood

Events half the world away have a way of sending ripple effects on Thai equities. In this review, we examine five such events and their...

Athaporn Arayasantiparb, CFA

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