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

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> was hit quite hard in 2Q2020 in both its core retail and packaging businesses after a reasonable performance in 1Q2020 before the lockdown in Thailand and Vietnam took hold and during a period when consumers began stocking up. 
The real impact on the company's packaging business came in mid-April when the Thai government put an alcohol ban in place, which was lifted in mid-May but led breweries to close operations for 4-6 weeks. 
The ban was gradually lifted for retail stores initially followed by restaurants and bars and as a result, June saw recovery and July beer sales almost back to pre-COVID-19 levels. 
<a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> non-alcohol bottling saw positive momentum from strong growth in sales of Vitamin C drinks. It also saw a strong response to its new 500ml cans, which are popular for home beer consumption. 
The aluminium can division has also seen the benefits of new customers coming on stream and replacing the gap left by reduced demand from Carabao. It is also seeing some scale benefits as a result of this for its slim cans.
<a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)'</a>s core retail business under Big C saw a serious impact from COVID-19 in 2Q2020 with total sales down by -11.4%, with SSSG -17% but excluding its B-to-B business, SSSG fell an even greater -21.1% in 2Q2020.
<a href="https://www.smartkarma.com/entities/berli-jucker-public-co-ltd" target="_blank" data-smartkarma-citation="entities:3685:1" rel="noopener">Berli Jucker (BJC TB)</a> remains a well-rounded South East Asia recovery story through its packaging, with exposure to Thailand, Vietnam and Malaysia, as well as retail, with its number two position in Thailand in the hypermarket and supermarket space.
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Valuations look attractive versus history and with the prospect of a rapid recovery next year with the company trading in 22.0x FY21E PER versus its 5-year average forward PER of 29x, especially given a strong forecast recovery in earnings over the next two years. It also trades at a discount to Thai retail peers, despite a more positive earnings outlook. 
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Berli Jucker (BJC TB) was hit quite hard in 2Q2020 in both its core retail and packaging businesses after a reasonable performance in 1Q2020 before the lockdown in Thailand and Vietnam took hold and during a period when consumers began stocking up. 
The real impact on the company's packaging business came in mid-April when the Thai government put an alcohol ban in place, which was lifted in mid-May but led breweries to close operations for 4-6 weeks. 
The ban was gradually lifted for retail stores initially followed by restaurants and bars and as a result, June saw recovery and July beer sales almost back to pre-COVID-19 levels. 
Berli Jucker (BJC TB) non-alcohol bottling saw positive momentum from strong growth in sales of Vitamin C drinks. It also saw a strong response to its new 500ml cans, which are popular for home beer consumption. 
The aluminium can division has also seen the benefits of new customers coming on stream and replacing the gap left by reduced demand from Carabao. It is also seeing some scale benefits as a result of this for its slim cans.
Berli Jucker (BJC TB)'s core retail business under Big C saw a serious impact from COVID-19 in 2Q2020 with total sales down by -11.4%, with SSSG -17% but excluding its B-to-B business, SSSG fell an even greater -21.1% in 2Q2020.
Berli Jucker (BJC TB) remains a well-rounded South East Asia recovery story through its packaging, with exposure to Thailand, Vietnam and Malaysia, as well as retail, with its number two position in Thailand in the hypermarket and supermarket space.

Valuations look attractive versus history and with the prospect of a rapid recovery next year with the company trading in 22.0x FY21E PER versus its 5-year average forward PER of 29x, especially given a strong forecast recovery in earnings over the next two years. It also trades at a discount to Thai retail peers, despite a more positive earnings outlook. 


Berli Jucker (BJC TB) - SE Asia's Consumer Recovery Proxy

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.

We have a BUY recommendation on STI based on our target of Bt10.10, implying an upside of 31% from the current share price. With the consolidation of AEC, we change our valuation method from sum-of the-parts to a DCF-based valuation and use a WACC of 6.8% and a terminal growth rate of 3%. We apply a 15% small-cap discount.
Investment thesis:
<ul>
<li>Recent acquisition gives access to government infrastructure projects</li>
<li>Major shareholder as a key strategic partner for deal flow</li>
<li>Backlog ensures strong near-term growth and revenue stability</li>
</ul>
Interim: Large-scale projects and the successful integration of AEC have driven strong 2Q20 results. We still believe that the market does not consider the benefits of the acquisition to the full extent, providing high upside potential.
Risks: Reliance on limited industries, delay in project completion, shortage of experienced personnel, and adverse regulatory changes.

We have a BUY recommendation on STI based on our target of Bt10.10, implying an upside of 31% from the current share price. With the consolidation of AEC, we change our valuation method from sum-of the-parts to a DCF-based valuation and use a WACC of 6.8% and a terminal growth rate of 3%. We apply a 15% small-cap discount.
Investment thesis:

Recent acquisition gives access to government infrastructure projects
Major shareholder as a key strategic partner for deal flow
Backlog ensures strong near-term growth and revenue stability

Interim: Large-scale projects and the successful integration of AEC have driven strong 2Q20 results. We still believe that the market does not consider the benefits of the acquisition to the full extent, providing high upside potential.
Risks: Reliance on limited industries, delay in project completion, shortage of experienced personnel, and adverse regulatory changes.

STI: Acquisition Benefits Are Not Fully Priced In, Strong BUY

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

BG Container Glass PCL / Equity Bottom-Up

Yesterday analyst meeting came out with a slightly positive tone. We expect 3Q20 performance to grow QoQ and YoY as revenue from packaging business recovery and revenue contribution from power plant business.
<ul>
<li>We expect 3Q20 earnings to grow both YoY and QoQ given revenue from packaging business turn to slightly growth YoY in July 2020 and revenue contribution from power plant business. </li>
<li>Revise down 2020-21E earnings by 9% and 8% to factor in weak sales than our forecast.</li>
<li>Announced a quarterly dividend payment of Bt0.09 (XD on 26 Aug), which is equivalent to 1% dividend yield.</li>
<li>We still like BGC on 1). Secured earnings with attractive dividend yield, 2) Gross margin is in an expansion phase, and 3) Potential growth from M&amp;As.</li>
</ul>
We upgrade to BUY from HOLD rating and roll over target price to Bt11.5 based on 12.3xPE’21E, close to the average for the Asia ex-Japan Materials Sector.

Yesterday analyst meeting came out with a slightly positive tone. We expect 3Q20 performance to grow QoQ and YoY as revenue from packaging business recovery and revenue contribution from power plant business.

We expect 3Q20 earnings to grow both YoY and QoQ given revenue from packaging business turn to slightly growth YoY in July 2020 and revenue contribution from power plant business. 
Revise down 2020-21E earnings by 9% and 8% to factor in weak sales than our forecast.
Announced a quarterly dividend payment of Bt0.09 (XD on 26 Aug), which is equivalent to 1% dividend yield.
We still like BGC on 1). Secured earnings with attractive dividend yield, 2) Gross margin is in an expansion phase, and 3) Potential growth from M&amp;As.

We upgrade to BUY from HOLD rating and roll over target price to Bt11.5 based on 12.3xPE’21E, close to the average for the Asia ex-Japan Materials Sector.

BGC: Re-Opening the Cities Will Drive 2H20 Performance

We initiate coverage on STI with a BUY recommendation based on a target price of Bt10.10, implying an upside of 29% from the current price. We derive our target price from a sum-of-the-parts approach and apply a 15% small-cap discount.
Investment thesis:
<ul>
<li>Recent acquisition gives access to government infrastructure projects</li>
<li>Major shareholder as a key strategic partner for deal flow</li>
<li>Backlog ensures strong near-term growth and revenue stability</li>
</ul>
Risks: Reliance on limited industries, delay in project completion, shortage of experienced personnel, and adverse regulatory changes.

We initiate coverage on STI with a BUY recommendation based on a target price of Bt10.10, implying an upside of 29% from the current price. We derive our target price from a sum-of-the-parts approach and apply a 15% small-cap discount.
Investment thesis:

Recent acquisition gives access to government infrastructure projects
Major shareholder as a key strategic partner for deal flow
Backlog ensures strong near-term growth and revenue stability

Risks: Reliance on limited industries, delay in project completion, shortage of experienced personnel, and adverse regulatory changes.

STI: Solid Groundwork Laid for an Attractive Investment

Central Retail Corp Ltd / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/central-retail-corp-ltd" target="_blank" data-smartkarma-citation="entities:28240:1" rel="noopener">Central Retail (CRC TB)</a> has been probably been the most impacted retail player in Thailand from COVID-19, given its heavy exposure to department stores, which were forced to close for a period.
CRC also has significant exposure to Italy through its department stores there, which were also closed for a time during that country's lockdown. 
The company's other retail exposure in Thailand through CP Foodhall, Tops, and Family Mart have proved relatively resilient, whilst BIGC in Vietnam has also fared well and should recover quickly. 
Now that Thailand is gradually emerging from the pandemic, we would expect a much better performance in 2H2020, with tailwinds from Italy and Vietnam. 
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A looming recovery is not being reflected in the stock price, which has been nudging new lows since its IPO and underperforming its retail peers. <a href="https://www.smartkarma.com/entities/central-retail-corp-ltd" target="_blank" data-smartkarma-citation="entities:28240:1" rel="noopener">Central Retail (CRC TB)</a> trades on 25.0 FY21E PER and 21.0x FY22E PER, with forecast EPS growth +90% and +18% for FY21E and FY22E respectively. It also trades on 8.1x FY21E EV/EBITDA, which is a significant discount to peers. We would see this as a high-conviction recovery play. 
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Central Retail (CRC TB) has been probably been the most impacted retail player in Thailand from COVID-19, given its heavy exposure to department stores, which were forced to close for a period.
CRC also has significant exposure to Italy through its department stores there, which were also closed for a time during that country's lockdown. 
The company's other retail exposure in Thailand through CP Foodhall, Tops, and Family Mart have proved relatively resilient, whilst BIGC in Vietnam has also fared well and should recover quickly. 
Now that Thailand is gradually emerging from the pandemic, we would expect a much better performance in 2H2020, with tailwinds from Italy and Vietnam. 

A looming recovery is not being reflected in the stock price, which has been nudging new lows since its IPO and underperforming its retail peers. Central Retail (CRC TB) trades on 25.0 FY21E PER and 21.0x FY22E PER, with forecast EPS growth +90% and +18% for FY21E and FY22E respectively. It also trades on 8.1x FY21E EV/EBITDA, which is a significant discount to peers. We would see this as a high-conviction recovery play. 


Central Retail (CRC TB) - Buy for Looming Recovery

Thailand

Ch. Karnchang Public Company Limited provides construction services to public and private sectors including construction of expressways, public utilities, and industrial plants. Through it subsidiaries, the Company distributes construction materials.

Gunkul Engineering PCL is a power generation and engineering company that supplies hardware and accessory products used in electrical power transmission and distribution systems.

Dynasty Ceramic Public Company Limited produces ceramic floor tiles used for both indoor and outdoor construction and decoration.

Sino Thai Engineering & Construction Public Company Limited provides engineering and construction services to the public and private sectors.  The Company's activities include energy project construction, building construction, industrial plant construction, environment project construction, as well as transportation project and infrastructure construction.

Sino-Thai Engineering & Construction (STEC TB)

Vanachai Group Public Company Limited manufactures and distributes board panels as substitute for natural wood.  The Company's products include medium density fiber boards (MDF) and particle boards.  Its subsidiary also produces glue products.

BTS Group Holdings PCL is primarily in the business of Mass Transit.  The Company operates Bangkok's BTS SkyTrain system and the Bus Rapid Transit (BRT) System. BTS Group Holdings PCL is also involved in Media & Advertising, Property Development, and Services business.

Bangkok Airways Company Limited offers air transportation services. The Company operates flights and airports to various resort destinations in Thailand, Myanmar, Laos, Cambodia, Vietnam, Malaysia, Singapore, China, and Japan.

Italian-Thai Development PCL involves in construction, project management, and engineering and design of large-scale civil works and infrastructure projects in Thailand and Southeast Asia. The Company's projects include industrial plants, building, pipelines, transportation, airport work, dams, tunnels, steel structures and telecommunications.

Unique Engineering & Construction PCL is an engineering and construction company. The Company's services include bridge and tunnel construction and infrastructure design.

GT Capital Holdings Inc. is an investment holding company. The Company, through its subsidiaries, provides banking, automotive, property development, infrastructure, utilities, and insurance services.

Keihan Holdings Co., Ltd. mainly provides passenger rail and bus transportation in Osaka and Kyoto prefectures.  The Company operates department stores, hotels, travel agents, and restaurants in the vicinity of its railway system.  The Company leases and sells real estate and offers a wide range of construction works.

Doosan Co., Ltd operates as a diversified manufacturing and service company. The Company conducts electronic components production, logistics equipment manufacturing, information technology consulting, and other businesses. Doosan provides services worldwide.

DMCI Holdings Inc., through its subsidiaries, provides general construction and infrastructure construction. DMCI also develops real estate and mines coal. In addition, DMCI manufactures cement and other products.

Hap Seng Consolidated Berhad is an investment holding company.  The Company, through its subsidiaries, operates oil palm and cocoa plantations, trades heavy equipment and motor vehicles, fabricates and sells commercial trailers and tankers, provides leasing and money lending, and manufactures agricultural fertilizers, agro-chemicals, building materials, and plantation supplies.

Dubai Investments PJSC offers venture capital.  The Company invests in joint ventures and local companies.  Dubai Investments holds interests in dairy farms, publishers and real estate developers, and manufacturers of glass, pharmaceuticals, vegetable oils, building materials, and aluminum extrusions.

Shanghai Industrial Holdings Limited is an investment holding company that focuses on three core businesses: infrastructure facilities, real estate and consumer products. SIHL invests in toll road projects, water-related business, property development, investment, hotel operation, the manufacturing and sale of cigarettes, packaging materials and printed products.

Nava Bharat Ventures Limited manufactures ferro alloys which are utilized by the steel industry. The Company also generates & distributes power and manufactures sugar.

China Baoan Group Co., Ltd. develops, leases, and manages residential and commercial real estate properties in Shenzhen, Wuhan, Hainan, and Shanghai areas.  Through its subsidiaries, the Company also produces medical products and sells its products on a retail chain stores basis.

Refrigeration Electrical Engineering Corporation is an electrical company. The Company manufactures, markets, and installs refrigerating systems for commercial and industrial purposes.

Berli Jucker PCL is a large Thai conglomerate whose business spans various industries. The Company's operations include the distribution and manufacturing of its own products plus contract distribution and manufacturing for other firms. BJC's core lines of business are packaging, consumer, healthcare, technical and other businesses.

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Berli Jucker (BJC TB)