Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a>, SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.</p><p>The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.</p><p>The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.</p><p>Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.</p><p>In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.</p>

The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the Stock Exchange of Thailand SET 50 Index (SET50 INDEX), SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

We pick stocks. We construct portfolios. All our effort is focused on how to better pick stocks and construct portfolios. We serve fund management companies, family offices, and high net worth individuals.

Equity Bottom-Up

<p><strong>We change our recommendation on CHAYO to SELL from HOLD but raise our target price to Bt8.70 (previously Bt7.30), implying a downside of 22% from the current price. We derive our target price from a 30% premium to the 2021E PB of Thai Diversified Financials and apply a 15% small-cap discount, giving a 2021E 4x target PB.</strong></p>
<p><strong>Investment thesis:</strong></p>
<ul>
<li>Rising level of bad loans in Thailand can boost core business</li>
<li>Economic uncertainty helps to expand the customer base for debt collection</li>
<li>Joining the hemp hype supposed to bring additional income</li>
<li>Debt collection to further benefit from increasing mobile usage</li>
<li>High growth is priced in, warrant exercise to fund growth</li>
</ul>
<p><strong>Interim:</strong> The 4Q20 results were strong, and we revise our loan-growth and loan yield slightly upward. However, we still think that CHAYO lags its huge potential.</p>
<p><strong>Risks:</strong> Increased competition in acquiring non-performing loans, loss from unsecured debt management, adverse regulatory changes, and potential litigation issues arising from debt collection service.</p>

We change our recommendation on CHAYO to SELL from HOLD but raise our target price to Bt8.70 (previously Bt7.30), implying a downside of 22% from the current price. We derive our target price from a 30% premium to the 2021E PB of Thai Diversified Financials and apply a 15% small-cap discount, giving a 2021E 4x target PB.
Investment thesis:

Rising level of bad loans in Thailand can boost core business
Economic uncertainty helps to expand the customer base for debt collection
Joining the hemp hype supposed to bring additional income
Debt collection to further benefit from increasing mobile usage
High growth is priced in, warrant exercise to fund growth

Interim: The 4Q20 results were strong, and we revise our loan-growth and loan yield slightly upward. However, we still think that CHAYO lags its huge potential.
Risks: Increased competition in acquiring non-performing loans, loss from unsecured debt management, adverse regulatory changes, and potential litigation issues arising from debt collection service.

CHAYO: High Growth Expectations Make It Hard to Outperform

<div><p>The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a> in mid-June and the changes will be effective after the close of trading on 30 June.</p></div><div>
<p>The review period for market cap calculations runs from 1 March to 31 May, while the liquidity calculations run from 1 June 2020 to 31 May 2021.</p>
<p>We see three potential changes at the current time with an estimated one-way turnover for the rebalance at 2.19%.</p>
<p>Potential inclusions are <a href="https://www.smartkarma.com/entities/sri-trang-gloves-thailand-public-company-limited" target="_blank" data-smartkarma-citation="entities:29141:1" rel="noopener">Sri Trang Gloves (Thailand) Public Company Limited (STGT TB)</a>, <a href="https://www.smartkarma.com/entities/sri-trang-agro-industry-pcl" target="_blank" data-smartkarma-citation="entities:2759:1" rel="noopener">Sri Trang Agro Industry (STA TB)</a> and <a href="https://www.smartkarma.com/entities/irpc-pcl" target="_blank" data-smartkarma-citation="entities:19051:1" rel="noopener">IRPC PCL (IRPC TB)</a>.</p>
<p>Potential deletions are <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" data-smartkarma-citation="entities:12409:1" rel="noopener">VGI PCL (VGI TB)</a>, <a href="https://www.smartkarma.com/entities/com7-pcl" target="_blank" data-smartkarma-citation="entities:27411:1" rel="noopener">Com7 PCL (COM7 TB)</a> and <a href="https://www.smartkarma.com/entities/toa-paint-thailand-pcl" target="_blank" data-smartkarma-citation="entities:24235:1" rel="noopener">TOA Paint (Thailand) (TOA TB)</a>.</p>
<p><a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> will not completed six months of trading history by the end of the review period and will not be eligible for inclusion at the June rebalance.</p>
<p>There is a possibility that the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a> methodology is changed to make it a free float weighted market cap index from a full market cap index. That will see a lot of passive flow on some stocks that have a low free float.</p>
</div>

The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) in mid-June and the changes will be effective after the close of trading on 30 June.
The review period for market cap calculations runs from 1 March to 31 May, while the liquidity calculations run from 1 June 2020 to 31 May 2021.
We see three potential changes at the current time with an estimated one-way turnover for the rebalance at 2.19%.
Potential inclusions are Sri Trang Gloves (Thailand) Public Company Limited (STGT TB), Sri Trang Agro Industry (STA TB) and IRPC PCL (IRPC TB).
Potential deletions are VGI PCL (VGI TB), Com7 PCL (COM7 TB) and TOA Paint (Thailand) (TOA TB).
Kerry Express Thailand (KEX TB) will not completed six months of trading history by the end of the review period and will not be eligible for inclusion at the June rebalance.
There is a possibility that the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) methodology is changed to make it a free float weighted market cap index from a full market cap index. That will see a lot of passive flow on some stocks that have a low free float.


SET50 Index Rebalance Preview: Potentially Three Changes & Move to Free Float Weighting

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p>Another double dose of StubWorld this week ...</p>
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<p><a href="https://www.smartkarma.com/entities/intouch-holdings-pcl" target="_blank" data-smartkarma-citation="entities:17638:1" rel="noopener">Intouch Holdings (INTUCH TB)</a>'s long-term implied stub is around a four-year high. The simple ratio (Intouch/<a href="https://www.smartkarma.com/entities/advanced-info-service-pcl" target="_blank" data-smartkarma-citation="entities:947:1" rel="noopener">Advanced Info Service (ADVANC TB)</a>) is around levels only briefly touched in the last decade.</p>
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<div>Preceding my comments on Intouch are the (bi-) weekly setup/unwind tables for Asia-Pacific Holdcos.</div>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
<div>
<p>As always, more below the fold.</p>
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</div>


Another double dose of StubWorld this week ...



Intouch Holdings (INTUCH TB)'s long-term implied stub is around a four-year high. The simple ratio (Intouch/Advanced Info Service (ADVANC TB)) is around levels only briefly touched in the last decade.



Preceding my comments on Intouch are the (bi-) weekly setup/unwind tables for Asia-Pacific Holdcos.



These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.

As always, more below the fold.



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

<p><strong>ADVANC’s 4Q20 net profit was at Bt7.2bn (+1%YoY, +10%QoQ). The company reported 2020 net profit of Bt27bn(-12%YoY), which is 4% below our estimation.</strong></p><div>• Excluding FX gain/loss items, 4Q20 earnings from continuing operations was at Bt6.4bn(-9%YoY, -6%QoQ).</div><div></div><div>• A decrease in earnings performance both YoY and QoQ was due to higher amortization cost from 5G spectrum license.</div><div></div><div>• ARPU continuously decreased to Bt234 (-1%YoY,-7%QoQ), an all-time low level.</div><div></div><div>• ADVANC announced cash dividend payment of Bt3.68 per share(XD on 19 Feb 21)</div><div></div><div>• Expect performance to recover to pre-COVID level in 2H21.</div><div></div><div>• We expect modest rebound with 2% growth in 2021 on the back of an increase in postpaid subscriber. However, 2021 performance would still be under pressure from amortization cost from 4G/5G and 2600MHz license.</div><div>
<br>
</div><p><strong>We maintain BUY rating and target price of Bt233.2, derived from a DCF, implying 24.8xPE’21E, 7% premium to the World telecoms sector. Our rating are also backed by robust earnings with 4% dividend yield and its largest total spectrum of bandwidth compared to peers.</strong></p>

ADVANC’s 4Q20 net profit was at Bt7.2bn (+1%YoY, +10%QoQ). The company reported 2020 net profit of Bt27bn(-12%YoY), which is 4% below our estimation.• Excluding FX gain/loss items, 4Q20 earnings from continuing operations was at Bt6.4bn(-9%YoY, -6%QoQ).• A decrease in earnings performance both YoY and QoQ was due to higher amortization cost from 5G spectrum license.• ARPU continuously decreased to Bt234 (-1%YoY,-7%QoQ), an all-time low level.• ADVANC announced cash dividend payment of Bt3.68 per share(XD on 19 Feb 21)• Expect performance to recover to pre-COVID level in 2H21.• We expect modest rebound with 2% growth in 2021 on the back of an increase in postpaid subscriber. However, 2021 performance would still be under pressure from amortization cost from 4G/5G and 2600MHz license.
 
We maintain BUY rating and target price of Bt233.2, derived from a DCF, implying 24.8xPE’21E, 7% premium to the World telecoms sector. Our rating are also backed by robust earnings with 4% dividend yield and its largest total spectrum of bandwidth compared to peers.

ADVANC: 4Q20 Was Still Pressured by Decreasing in ARPU

Thailand

Advanced Info Service Public Company Limited is granted a 25-year concession expiring the year 2015 by the Telephone Organization of Thailand to provide cellular phone services.  The Company provides analog mobile phone services through the Nordic Mobile Telephone (NMT900) network, and digital phone services through the Global Systems for Mobile Communication (GSM) network.

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Advanced Info Service (ADVANC TB)

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

The SET has commenced a market consultation on the proposed changes to make its indices free float market cap weighted. We look at the impact on...

Brian Freitas

CHAYO: High Growth Expectations Make It Hard to Outperform

We change our recommendation on CHAYO to SELL from HOLD but raise our target price to Bt8.70 (previously Bt7.30), implying a downside of 22% from...

A. Stotz Investment Research

SET50 Index Rebalance Preview: Potentially Three Changes & Move to Free Float Weighting

There could be 3 changes to the SET50 at the June review with STGT, STA & IRPC joining the index at the expense of VGI, TOA & COM7. The methodology...

Brian Freitas

StubWorld: Intouch Is A Short Here

The current NAV discount - or simple ratio - are not sustainable. Unless Gulf reloads another 5%, at a NAV discount level 10ppt tighter than when...

David Blennerhassett

ADVANC: 4Q20 Was Still Pressured by Decreasing in ARPU

ADVANC’s 4Q20 net profit was at Bt7.2bn (+1%YoY, +10%QoQ). The company reported 2020 net profit of Bt27bn(-12%YoY), which is 4% below our estimation.

Pi Securities PCL, Thailand

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