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

MEGA reported 3Q18 net profit of Bt255m (+4%YoY, -12%QoQ). 9M18 result accounts for 63% of our full year forecast and is slightly below our expectation.
<ul>
<li>Despite 10%YoY growth in 3Q18 sales, change in product mix caused a decline in gross margin to 41.8% compared to 44.9% in 3Q17. SG&amp;A-to-sales ratio also widened to 32.1% compared to 30.9% in 3Q17 due to rising marketing expenses related to distributing business.</li>
<li>Overall, 9M18 net profit grew 10%YoY driven by 8%YoY in sales growth with slight narrowing gross margin to 43.9% compared to 44.3%.</li>
</ul>
We maintain our positive outlook toward its 4Q18 performance and beyond driven by seasonal effect in 4Q18 and gaining from marketing effort. We maintain our BUY rating with a target price of Bt43 based on DCF (12.5%WACC  , 0%TG
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/070/337/original/Picture2.jpg?1542598686" class="editor-image img-responsive" data-smartkarma-image-id="70337"></figure>
<div class="content-caption">Sources: CGS Research, company data</div>

MEGA reported 3Q18 net profit of Bt255m (+4%YoY, -12%QoQ). 9M18 result accounts for 63% of our full year forecast and is slightly below our expectation.

Despite 10%YoY growth in 3Q18 sales, change in product mix caused a decline in gross margin to 41.8% compared to 44.9% in 3Q17. SG&amp;A-to-sales ratio also widened to 32.1% compared to 30.9% in 3Q17 due to rising marketing expenses related to distributing business.
Overall, 9M18 net profit grew 10%YoY driven by 8%YoY in sales growth with slight narrowing gross margin to 43.9% compared to 44.3%.

We maintain our positive outlook toward its 4Q18 performance and beyond driven by seasonal effect in 4Q18 and gaining from marketing effort. We maintain our BUY rating with a target price of Bt43 based on DCF (12.5%WACC  , 0%TG

Sources: CGS Research, company data

MEGA: 3Q18 Result Is Slightly Below Our Expectation

We initiate coverage on MEGA with a BUY rating and based on a target price of Bt43, which is derived from the DCF methodology (WACC 12.5% and terminal growth 0%), or equivalent to 27.9xPE’18E, which is a 20% discount from its domestic peers.
The story:
<ul>
<li>Solid position to enjoy growing consumer health industry trend</li>
<li>Umbrella brand strategy to extend market reach</li>
<li>Leading distributor in Indochina market, especially Myanmar</li>
<li>Cash-rich firm poised for ample upside from inorganic growth</li>
</ul>
Risks:
<ul>
<li>Currency fluctuations</li>
<li>Highly competitive industry</li>
<li>Unpredictable political situation in Myanmar</li>
</ul>
Background: Mega Lifesciences Public Company Limited (MEGA) was established in 1982. It is engaged in manufacturing, marketing, selling and distributing quality pharmaceutical, nutraceutical products and Fast-Moving Consumer Goods (FMCG). Headquartered in Bangkok, the company has a presence in 32 countries.  Its manufacturing facilities in Thailand and Australia have received international accreditation from reputed health authorities around the world with respect to good manufacturing practices. The company exports to Asia-Pacific, Middle Eastern, African, CIS, Latin American and European countries.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/063/483/original/mega3.JPG?1536640484" class="editor-image img-responsive" data-smartkarma-image-id="63483"></figure>
<div class="content-caption">Sources: CGS Research, company data</div>

We initiate coverage on MEGA with a BUY rating and based on a target price of Bt43, which is derived from the DCF methodology (WACC 12.5% and terminal growth 0%), or equivalent to 27.9xPE’18E, which is a 20% discount from its domestic peers.
The story:

Solid position to enjoy growing consumer health industry trend
Umbrella brand strategy to extend market reach
Leading distributor in Indochina market, especially Myanmar
Cash-rich firm poised for ample upside from inorganic growth

Risks:

Currency fluctuations
Highly competitive industry
Unpredictable political situation in Myanmar

Background: Mega Lifesciences Public Company Limited (MEGA) was established in 1982. It is engaged in manufacturing, marketing, selling and distributing quality pharmaceutical, nutraceutical products and Fast-Moving Consumer Goods (FMCG). Headquartered in Bangkok, the company has a presence in 32 countries.  Its manufacturing facilities in Thailand and Australia have received international accreditation from reputed health authorities around the world with respect to good manufacturing practices. The company exports to Asia-Pacific, Middle Eastern, African, CIS, Latin American and European countries.

Sources: CGS Research, company data

MEGA: Supplement Maker Spreads Healthy Message in Booming Region

Australia

Blackmores Limited manufactures and markets vitamin, herbal, mineral supplements and natural skin and hair treatment products in Australia and New Zealand. These products are supplied to the over the counter retail market and to health care professionals. The Company also has a line of natural beauty and aromatherapy products and its products are distributed in South East Asia.

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Blackmores Ltd (BKL AU)

MEGA: 3Q18 Result Is Slightly Below Our Expectation

MEGA reported 3Q18 net profit of Bt255m (+4%YoY, -12%QoQ). 9M18 result accounts for 63% of our full year forecast and is slightly below our...

Pi Securities PCL, Thailand

MEGA: Supplement Maker Spreads Healthy Message in Booming Region

We initiate coverage on MEGA with a BUY rating and based on a target price of Bt43, which is derived from the DCF methodology (WACC 12.5% and...

Pi Securities PCL, Thailand

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