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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

Delta Electronics Thailand  / Event-Driven

<ul>
<li>The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from 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">SET50 INDEX</a>.</li>
<li>The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.</li>
<li>Separately, the <a href="https://www.smartkarma.com/entities/total-access-communication" target="_blank" data-smartkarma-citation="entities:948:1" rel="noopener">Total Access Communication (DTAC TB)</a> / <a href="https://www.smartkarma.com/entities/true-corp-pcl" target="_blank" data-smartkarma-citation="entities:8:1" rel="noopener">True Corp Pcl (TRUE TB)</a> merger could result in an ad hoc inclusion prior to the regular rebalance in December.</li>
</ul>


The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from the SET50 INDEX.
The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.
Separately, the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger could result in an ad hoc inclusion prior to the regular rebalance in December.


SET50 Index: Market Consultation & DTAC/TRUE Merger Impact

<ul>
<li>The market cap review period for the December rebalance 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> started on 1 September and will end 30 November.</li>
<li>We currently see one high probability change and two lower probability changes to the index at the upcoming rebalance.</li>
<li>There are a couple of lower probability adds/deletes that will have between 3-5 days of ADV to trade from passive funds and could be interesting from a trading angle.</li>
</ul>


The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) started on 1 September and will end 30 November.
We currently see one high probability change and two lower probability changes to the index at the upcoming rebalance.
There are a couple of lower probability adds/deletes that will have between 3-5 days of ADV to trade from passive funds and could be interesting from a trading angle.


SET50 Index Rebalance Preview: Three Potential Changes in December

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

Delta Electronics Thailand  / Equity Bottom-Up

<ul>
<li>We downgrade to HOLD from BUY and raise TP to Bt475, up 12% from previous TP, based on 38.6xPE’23E (average of 5-year trading). Analyst meeting came with a neutral tone. </li>
<li>2Q22 should be the highest of the year We believe its quarterly earnings already peaked in 2Q22 as the USD/THB will unlikely depreciate further, gains from FX will be limited </li>
<li>However, we believe the company will see significant earnings growth in 22E. 2H22 sales should contribute 53% of full-year 22E sales,due to the robust demand in EVs and data centers. </li>
</ul>


We downgrade to HOLD from BUY and raise TP to Bt475, up 12% from previous TP, based on 38.6xPE’23E (average of 5-year trading). Analyst meeting came with a neutral tone. 
2Q22 should be the highest of the year We believe its quarterly earnings already peaked in 2Q22 as the USD/THB will unlikely depreciate further, gains from FX will be limited 
However, we believe the company will see significant earnings growth in 22E. 2H22 sales should contribute 53% of full-year 22E sales,due to the robust demand in EVs and data centers. 


DELTA :  Growth Potential in 2022 Priced In

<ul>
<li>We maintain our BUY rating but roll-over our TP by 1%to Bt423 based on38.6xPE’23E (5-Year average trading).Our rating reflects neutral outlook on DELTA’s23Eearnings growth due to a high 22E base.</li>
<li>Outstanding 2Q22 earnings should be unsustainable Net profit in 2Q22 was at Bt4.3bn (+53% YoY, +158% QoQ), which was 60% above our forecast, as well as consensus. Copper dropping </li>
<li>Sales in 2Q22 was at Bt28bn (+36% YoY,+14% QoQ),driven QoQ and YoY by continued strong growth in EV power,thermal fan, and data center segments,which should be the trend going forward.</li>
</ul>


We maintain our BUY rating but roll-over our TP by 1%to Bt423 based on38.6xPE’23E (5-Year average trading).Our rating reflects neutral outlook on DELTA’s23Eearnings growth due to a high 22E base.
Outstanding 2Q22 earnings should be unsustainable Net profit in 2Q22 was at Bt4.3bn (+53% YoY, +158% QoQ), which was 60% above our forecast, as well as consensus. Copper dropping 
Sales in 2Q22 was at Bt28bn (+36% YoY,+14% QoQ),driven QoQ and YoY by continued strong growth in EV power,thermal fan, and data center segments,which should be the trend going forward.


DELTA : Outstanding 2Q22 Earnings Leads to High 22E Base and Limited Growth in 23E

<ul>
<li>We maintain our BUY rating and TP of Bt419 based on based on 51.7xPE’22E. Business update meeting last Friday came with positive news on improving shortage situation by 4Q22 </li>
<li>2Q22E earnings to decline QoQ: We believe that 2Q22E net profit will be at Bt2.7bn (+61% YoY, -4% QoQ).</li>
<li>We expect 2Q22E sales to be at Bt24bn (+15%YoY, -4% QoQ). QoQ decline is mainly due to lockdown issues in China and longer holidays during 2Q22.</li>
</ul>


We maintain our BUY rating and TP of Bt419 based on based on 51.7xPE’22E. Business update meeting last Friday came with positive news on improving shortage situation by 4Q22 
2Q22E earnings to decline QoQ: We believe that 2Q22E net profit will be at Bt2.7bn (+61% YoY, -4% QoQ).
We expect 2Q22E sales to be at Bt24bn (+15%YoY, -4% QoQ). QoQ decline is mainly due to lockdown issues in China and longer holidays during 2Q22.


DELTA: Shortage Issue Still Persists Despite Concerns on Weakening Demand in 2022

Thailand

Fabrinet offers outsourced process engineering and manufacturing services.  The Company contracts to manufacture optical communications, automotive, industrial, and imaging components, sub-assemblies, and modules for its original equipment manufacturer customers.

KCE Electronics Public Company Limited and its subsidiaries manufacture and export single-layered, multi-layered, and double-sided printed circuit boards (PCBs) under its KCE trademark.  Multi-layered PCBs are used mainly in high technology equipment and high precision instruments.  Double-sided PCBs are used largely in telecommunication and computing equipment.

Hana Microelectronics Public Company Limited is an electronics manufacturing service company.  The Company manufactures electronic components on behalf of its customers for shipment to them or their customers.

Cal-Comp Electronics (Thailand) PCL is an original equipment manufacturer of computer peripheral, office equipment and consumer electronic products. Its products include desktop computers, CD-ROMS, web pads, MP3 players, integrated receiver decoders, fax machines, mobile phones, cordless phones, pagers, and transceivers.  The Company is part of Kinpo Group of Taiwan.

SVI Public Company Limited provides printed circuit board contract manufacturing services.  Most of its customers are original equipment manufacturers of computer peripheral products, telecommunication equipment, and industrial equipment and instruments.

Jaymart PCL distributes mobile phones and accessories.  The Company, through its subsidiaries, provide retail management and debt collection services.

Synnex Thailand PCL distributes computer products.  The Company distributes computer components and peripherals, servers and storage devices, security products, computer software, and consumables.

Forth Corp PCL manufactures and sells telecommunications and electronic equipment. The Company also develop and install the data management system, manufactures, sells, and installs traffic light system and equipment, manufactures and sells electronic signs, as well as distributes electronic parts.

SiS Distribution (Thailand) Public Company Ltd. distributes computers and peripherals.  The Company distributes the products to resellers, retailers, system integrators, software houses, value added resellers, and original equipment manufacturers.

Samart Corporation Public Company Limited develops satellite communication systems, supplies various system types of television signals, and provides mobile multimedia content as well as enterprise network solution services. The Company also distributes telecommunication products, and provides mobile phone service and air traffic control service in Cambodia.

Samsung SDI Co., Ltd. specializes in developing Lithium Ion Battery (LIB) technology.  The Company also manufactures cathode ray tubes (CRTs) for televisions and computer monitors.  Samsung SDI also produces liquid crystal display (LCD) components and rechargeable batteries for cellular phones , personal digital assistants (PDAs), Energy Storage Systems and solar panels.

Kyocera Corporation manufacturers electronic equipment and components. The Company's products include telecommunication equipment, information equipment, optical equipment, ceramic products, semiconductor parts, chips, hybrid integrated circuits, thermal printheads, image sensors, liquid crystal displays, and connectors. Kyocera operates worldwide.

Keysight Technologies, Inc. offers electronic measurement services using wireless, modular, and software solutions.

CDW Corporation of Delaware provides information technology products and services. The Company offers hardware, software, computer peripherals, cloud computing, mobile devices, network communication, and security solutions. CDW serves business, government, education, and healthcare customers throughout North America.

NAURA Technology Group Co., Ltd. is an integrated high-tech company, which manufactures electronics equipments and components, including IC equipments, hybrid integrated circuits and combines with R&D, sales, and services.

SYNNEX Corporation provides information technology supply chain services.  The Company offers services to original equipment manufacturers and software publishers worldwide.  SYNNEX offers product distribution, related logistics services, and contract assembly.

Hangzhou Hikvision Digital Technology Co., Ltd develops, manufactures and sells video surveillance products.  The Company manufactures video and audio compression card, network hard disk video recorders, video servers, cameras, network storage, and other digital products.

Largan Precision Company Limited manufactures and markets optical lens modules and optoelectronic components. The Company offers lenses for liquid crystal display (LCD) projectors, scanners, optical mice, digital still cameras (DSCs), digital versatile discs (DVDs), light emitting diodes (LEDs), and photography mobile phones.

Coherent Corp. designs engineered materials and optoelectronic components. The Company offers products to industrial, optical communications, military, life sciences, semiconductor equipment, and consumer markets. Coherent also manufactures semiconductor lasers and optics for high power industrial lasers, optical communications systems, datacenter connectivity, and 3D sensing.

Universal Display Corporation is a member of the United States Display Consortium.  The consortium is a cooperative industry/government effort aimed at developing an infrastructure to support a North American flat panel display infrastructure.  The Company and its partners are developing high-resolution, full color, light weight Organic Light Emitting Diode (OLED) technology.

Delta Electronics (Thailand) PCL designs and manufactures electronic equipment. The Company produces power systems for telecommunications, medical equipment, and industrial automation.  Delta also produces fans, electromagnetic interference filters, and solenoids.

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Delta Electronics Thailand (DELTA TB)

SET50 Index: Market Consultation & DTAC/TRUE Merger Impact

We look at potential index changes following SET's proposal to reduce the monthly turnover ratio from 5% to 2%. Separately, the DTAC/TRUE merger...

Brian Freitas

SET50 Index Rebalance Preview: Three Potential Changes in December

There could be 3 changes to the SET50 at the December rebalance. One is a high probability change while two others are potential adds/deletes. Some...

Brian Freitas

DELTA : Growth Potential in 2022 Priced In

We downgrade to HOLD from BUY and raise TP to Bt475, up 12% from previous TP, based on 38.6xPE’23E (average of 5-year trading). Analyst meeting...

Pi Securities PCL, Thailand

DELTA : Outstanding 2Q22 Earnings Leads to High 22E Base and Limited Growth in 23E

We maintain our BUY rating but roll-over our TP by 1% to Bt423 based on 38.6xPE’23E (5-Year average trading). Our rating reflects neutral outlook...

Pi Securities PCL, Thailand

DELTA: Shortage Issue Still Persists Despite Concerns on Weakening Demand in 2022

We maintain our BUY rating and TP of Bt419 based on based on 51.7xPE’22E. Business update meeting last Friday came with positive news on improving...

Pi Securities PCL, Thailand

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