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

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Thai Equity - Bottom-up - Equities

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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

We downgrade DOHOME from BUY to HOLD due to limited upside to our target. Our new target price of Bt14.2 (Previous TP; 16.50) derived from 33xPE’21E, which is close to the biggest home-improvement player in Thailand. Our target price cut factored in 17% dilution to EPS’21 from stock dividend paid during 3Q20 DOHOME reported 3Q20 net profit at Bt187m (+40%YoY, +28%QoQ). The 9M20 result was in-line with our expectation and accounted for 73% of 2020E forecast.<ul>
<li>We expect 4Q20 earnings performance to grow YoY, but flat QoQ driven by government stimulus scheme and improving margin from higher retail sales contribution.</li>
<li>We still like DOHOME for its 1) cheapest valuation with high potential growth compared to peers; 2) its store locations that aim to tap high spending customers; 3) store network expansion plan with +25%CAGR in the next two years; and 4) the ample room to improve its margin.</li>
</ul>

We downgrade DOHOME from BUY to HOLD due to limited upside to our target. Our new target price of Bt14.2 (Previous TP; 16.50) derived from 33xPE’21E, which is close to the biggest home-improvement player in Thailand. Our target price cut factored in 17% dilution to EPS’21 from stock dividend paid during 3Q20 DOHOME reported 3Q20 net profit at Bt187m (+40%YoY, +28%QoQ). The 9M20 result was in-line with our expectation and accounted for 73% of 2020E forecast.
We expect 4Q20 earnings performance to grow YoY, but flat QoQ driven by government stimulus scheme and improving margin from higher retail sales contribution.
We still like DOHOME for its 1) cheapest valuation with high potential growth compared to peers; 2) its store locations that aim to tap high spending customers; 3) store network expansion plan with +25%CAGR in the next two years; and 4) the ample room to improve its margin.


DOHOME: Solid SSSG Drove 3Q20 Earnings to Grow YoY

Yesterday analyst meeting came out with a positive tone. We maintain BUY rating with a target price of Bt15.6, which is derived from 33xPE’21E, a 40% premium to Thai Consumer Discretionary.Key takeaway:<ul>
<li>SSSG remains negative at single digit in October 2020. However, we expect SSSG to improve to -1.5% in 4Q20 from -3.7% and -17% in 3Q20 and 2Q20, respectively.</li>
<li>We expect 4Q20 performance to improve QoQ driven by 1) Government stimulus scheme (Shop Dee Mee Kuen) 2) HomePro Expo during 13-22 November 2020 and 3) Margin expansion from better cost control and higher product mix from China.</li>
</ul>We still like HMPRO for its 1) higher profitability compared to peers; 2) SSSG in recovering phase; 3) continuing stores expansion; and 4) long-term growth driver from Omni-channel sales.

Yesterday analyst meeting came out with a positive tone. We maintain BUY rating with a target price of Bt15.6, which is derived from 33xPE’21E, a 40% premium to Thai Consumer Discretionary.Key takeaway:
SSSG remains negative at single digit in October 2020. However, we expect SSSG to improve to -1.5% in 4Q20 from -3.7% and -17% in 3Q20 and 2Q20, respectively.
We expect 4Q20 performance to improve QoQ driven by 1) Government stimulus scheme (Shop Dee Mee Kuen) 2) HomePro Expo during 13-22 November 2020 and 3) Margin expansion from better cost control and higher product mix from China.
We still like HMPRO for its 1) higher profitability compared to peers; 2) SSSG in recovering phase; 3) continuing stores expansion; and 4) long-term growth driver from Omni-channel sales.

HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ

Bright earnings outlook in 2H20<ul>
<li>We maintain positive outlook on home improvement sector.</li>
<li>Earnings improve in 2H20: 2Q20 is the bottom quarter for all home improvement group. We expected 3Q20 earnings to improve QoQ for HMPRO and GLOBAL. While we foresee DOHOME to grow both QoQ and YoY in 3Q20.</li>
<li>Recovery SSSG in 2H20: After re-opening stores, we expected a SSSG improving QoQ in all home improvement group. We forecast Dohome SSSG at 9%YoY in 3Q20 mainly driven Ubon Ratchathani branch which it has low base in 3Q19 due to flooding impact. While we expect other players (ie., GLOBAL and HMPRO) to have negative SSSG according to Construction Materials Price Index (CMI) which is one of the best indicator to tracks SSSG. The CMI continues recover to 104.4 (-2.2%YoY) in August 2020 from a bottom of 103.5 (-4%YoY) in May 2020.</li>
<li>DOHOME is our top picks for 2H20 due to stronger SSSG than peers in 2H20, a rapid stores expansion plan, and cheapest valuation compare to peers.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/185/original/image_61708340921600931078689.png?1600931078" class="editor-image img-responsive" data-smartkarma-image-id="161185"></figure>

Bright earnings outlook in 2H20
We maintain positive outlook on home improvement sector.
Earnings improve in 2H20: 2Q20 is the bottom quarter for all home improvement group. We expected 3Q20 earnings to improve QoQ for HMPRO and GLOBAL. While we foresee DOHOME to grow both QoQ and YoY in 3Q20.
Recovery SSSG in 2H20: After re-opening stores, we expected a SSSG improving QoQ in all home improvement group. We forecast Dohome SSSG at 9%YoY in 3Q20 mainly driven Ubon Ratchathani branch which it has low base in 3Q19 due to flooding impact. While we expect other players (ie., GLOBAL and HMPRO) to have negative SSSG according to Construction Materials Price Index (CMI) which is one of the best indicator to tracks SSSG. The CMI continues recover to 104.4 (-2.2%YoY) in August 2020 from a bottom of 103.5 (-4%YoY) in May 2020.
DOHOME is our top picks for 2H20 due to stronger SSSG than peers in 2H20, a rapid stores expansion plan, and cheapest valuation compare to peers.


We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest home-improvement player in Thailand.
<ul>
<li>We expect 3Q20 earnings to grow to Bt189m (+41%YoY, 29%QoQ) driven by a strong SSSG at 9%, turning profit of Surin branch after one month operation, and improving margin from higher retail sales contribution.</li>
<li>We foresee SSSG at 9%YoY in 3Q20 mainly driven improving contribution from Ubon Ratchathani branch due to low base in 3Q19.</li>
<li>We revised up our sales and net profit forecast by 5% and 12% in 2020E to factor in strong SSSG than our expectation.</li>
</ul>
We still like DOHOME for its 1) cheapest valuation with high growth compared to peers; 2) the positioning of all its stores in locations of high potential demand; 3) plan to expand its store network by 60% within the next two years; and 4) the ample room to grow its margin.

We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest home-improvement player in Thailand.

We expect 3Q20 earnings to grow to Bt189m (+41%YoY, 29%QoQ) driven by a strong SSSG at 9%, turning profit of Surin branch after one month operation, and improving margin from higher retail sales contribution.
We foresee SSSG at 9%YoY in 3Q20 mainly driven improving contribution from Ubon Ratchathani branch due to low base in 3Q19.
We revised up our sales and net profit forecast by 5% and 12% in 2020E to factor in strong SSSG than our expectation.

We still like DOHOME for its 1) cheapest valuation with high growth compared to peers; 2) the positioning of all its stores in locations of high potential demand; 3) plan to expand its store network by 60% within the next two years; and 4) the ample room to grow its margin.

DOHOME: Expect SSSG Stronger than Peers in 2H20 and 2021

We initiate coverage of GLOBAL with a HOLD rating, based on a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the Thailand home-improvement subsector.
The story:
<ul>
<li>Capture potential growth of the ASEAN market.</li>
<li>Renovation of stores suggests positive SSSG outlook.</li>
<li>Store expansion will continue to drive long-term growth.</li>
</ul>
Risks:
<ul>
<li>Economic slowdown</li>
<li>Exchange-rate fluctuation</li>
<li>Highly competitive industry</li>
</ul>

We initiate coverage of GLOBAL with a HOLD rating, based on a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the Thailand home-improvement subsector.
The story:

Capture potential growth of the ASEAN market.
Renovation of stores suggests positive SSSG outlook.
Store expansion will continue to drive long-term growth.

Risks:

Economic slowdown
Exchange-rate fluctuation
Highly competitive industry


GLOBAL: Home-Improvement Player Eyes Opportunities in ASEAN

Thailand

Dohome Public Company Limited operates as a furnishing store. The Company retails hardware, tools, agricultural machinery, furniture, hvac equipment, and other related products. Dohome serves customers in Thailand.

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Dohome PCL (DOHOME TB)

DOHOME: Solid SSSG Drove 3Q20 Earnings to Grow YoY

We expect 4Q20 earnings performance to grow YoY, but flat QoQ driven by government stimulus scheme and improving margin from higher retail sales...

Pi Securities PCL, Thailand

HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ

We expect 4Q20 performance to improve QoQ driven by Government stimulus scheme (Shop Dee Mee Kuen) and Margin expansion from better cost control...

Pi Securities PCL, Thailand

Home Improvement Sector Outlook 2H20

Bright earnings outlook in 2H20 Positive outlook on home improvement group •Earnings improve in 2H20: 2Q20 is the bottom quarter for all home...

Pi Securities PCL, Thailand

DOHOME: Expect SSSG Stronger than Peers in 2H20 and 2021

We upgrade from HOLD to BUY rating with a new target price of Bt16.5 based on 33xPE’21E (Previous TP is Bt12.5), which is close to the biggest...

Pi Securities PCL, Thailand

GLOBAL: Home-Improvement Player Eyes Opportunities in ASEAN

We initiate coverage of GLOBAL with a HOLD rating, based on a target price of Bt20.5, which is derived from 33xPE’21E, close to the average of the...

Pi Securities PCL, Thailand

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