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

Thematic (Sector/Industry)

BCPG, GUNKUL, GULF top pick growth stocks<ul>
<li>
Earnings upcycle in 2021: We expect BCPG, GULF and GUNKUL to achieve 15 to 30% net profit growth during 2021 on the back 12 to 30% power generation capacity expansion in 2020-21 period.</li>
<li>
Declining gas price to support SPP performance: The industrial user power sales of SPP players BGRIM, GPSC and GULF (accounting 10 to 20% of the revenue) has rebound to pre – COVID 19 levels as of 4Q20.  We expect the declining gas cost (-10% YoY) will help in revamping the GPM and support the sector performance.</li>
</ul>EGCO, RATCH top pick value stocks<ul>
<li>
Cheap valuation: The stock price of EGCO and RATCH faced 70% and 30% fall in 2020 respectively. The stocks are trading very cheap at 9 to 13x PE’21E and having the companies already overcome the COVID-19 impact we believe the price correction has created an investment opportunity.</li>
<li>
Decent dividend yield: We expect RATCH and EGCO to pay a decent dividend yield of 3.3 to 4.4% in 2021.</li>
</ul>Maintain HOLD rating on BGRIM, EA and GPSC<ul><li>We have a positive view on BGRIM and GPSC as the SPP players will benefit from declining gas price. However, due to limit upside from current share price we maintain the HOLD rating. We recommend to HOLD EA, as the stock performance will depend on new EV-ESS business success and valuation demands.</li></ul>

BCPG, GUNKUL, GULF top pick growth stocks

Earnings upcycle in 2021: We expect BCPG, GULF and GUNKUL to achieve 15 to 30% net profit growth during 2021 on the back 12 to 30% power generation capacity expansion in 2020-21 period.

Declining gas price to support SPP performance: The industrial user power sales of SPP players BGRIM, GPSC and GULF (accounting 10 to 20% of the revenue) has rebound to pre – COVID 19 levels as of 4Q20.  We expect the declining gas cost (-10% YoY) will help in revamping the GPM and support the sector performance.
EGCO, RATCH top pick value stocks

Cheap valuation: The stock price of EGCO and RATCH faced 70% and 30% fall in 2020 respectively. The stocks are trading very cheap at 9 to 13x PE’21E and having the companies already overcome the COVID-19 impact we believe the price correction has created an investment opportunity.

Decent dividend yield: We expect RATCH and EGCO to pay a decent dividend yield of 3.3 to 4.4% in 2021.
Maintain HOLD rating on BGRIM, EA and GPSCWe have a positive view on BGRIM and GPSC as the SPP players will benefit from declining gas price. However, due to limit upside from current share price we maintain the HOLD rating. We recommend to HOLD EA, as the stock performance will depend on new EV-ESS business success and valuation demands.

Thailand Power Sector: Overweight-Bright 2021 Performance

Equity Bottom-Up

Yesterday analyst meeting come in a neutral tone. We maintain the BUY recommendation based on a target price of Bt49.0 derived using SOTP methodology, implying 26.0x PE’21.<div>• Expect 4Q20 earnings to remain flat YoY, while improve QoQ,  on the back of recovering wind power plant operations, enhancing contribution from biodiesel business, and earnings recognition from PCM business for the first time after commencing operation in 3Q20.</div><div></div><div>• Though the delay of EV-ESS business to 2021 could pressure the stock performance in short-term, we maintain our positive outlook for 2021-22, given the strong 12.0% CAGR EPS growth expectation backed by gradual earnings recognition from new businesses (EV-ESS).</div>

Yesterday analyst meeting come in a neutral tone. We maintain the BUY recommendation based on a target price of Bt49.0 derived using SOTP methodology, implying 26.0x PE’21.• Expect 4Q20 earnings to remain flat YoY, while improve QoQ,  on the back of recovering wind power plant operations, enhancing contribution from biodiesel business, and earnings recognition from PCM business for the first time after commencing operation in 3Q20.• Though the delay of EV-ESS business to 2021 could pressure the stock performance in short-term, we maintain our positive outlook for 2021-22, given the strong 12.0% CAGR EPS growth expectation backed by gradual earnings recognition from new businesses (EV-ESS).

EA: EV-ESS Business Success to Drive Future Earnings

We expect the delay of EA’s 1GWh ESS plant COD and EV-Car sales from 4Q20 to 1Q20 could induce a negative sentiments and pressure the stock performance in short-term. Thus, we recommend to trade and gradually accumulate the stock by 1Q21.<ul>
<li>The ESS plant COD and the EV-Car delivery to Suvarnabhumi pattana taxi union is postponed to 1Q20. We expect a 80% drop in number of cars sales from earlier guidance of 5,000 units for 2021.</li>
<li>Expect 3Q20 earnings to slightly improve both YoY and QoQ. The lower availability of solar power plants is expected to be compensated by better seasonal wind power plant operation..</li>
<li>Potential upside from EV-bus sales. EA plan to commence sales of EV buses by 2H21 and target 200-unit sales in 2021.</li>
</ul>We maintain our buy recommendation while revise down the target price to Bt49 (from previous Bt51) to factor in the 5 to 8% earnings revision for 2021-22E due to delay in EV-car sales. Our valuation is derived using SOTP method, implying 26x PE’21.

We expect the delay of EA’s 1GWh ESS plant COD and EV-Car sales from 4Q20 to 1Q20 could induce a negative sentiments and pressure the stock performance in short-term. Thus, we recommend to trade and gradually accumulate the stock by 1Q21.
The ESS plant COD and the EV-Car delivery to Suvarnabhumi pattana taxi union is postponed to 1Q20. We expect a 80% drop in number of cars sales from earlier guidance of 5,000 units for 2021.
Expect 3Q20 earnings to slightly improve both YoY and QoQ. The lower availability of solar power plants is expected to be compensated by better seasonal wind power plant operation..
Potential upside from EV-bus sales. EA plan to commence sales of EV buses by 2H21 and target 200-unit sales in 2021.
We maintain our buy recommendation while revise down the target price to Bt49 (from previous Bt51) to factor in the 5 to 8% earnings revision for 2021-22E due to delay in EV-car sales. Our valuation is derived using SOTP method, implying 26x PE’21.

EA: ESS Plant COD and EV Car Sales Delayed to 2021

We initiate coverage of EA with a BUY rating, based on a 2021E target price of Bt51, which is derived from a sum-of-the-parts (SOTP) methodology. Our valuation implies 0.8xPEG for 2021E, lower than the Thailand and World utilities sector’s 0.9x and 2.1x respectively.The story:<ul>
<li>Secured stable income from power generation arm until 2023.</li>
<li>New S-curve driver from EV and ESS business</li>
<li>Synergy benefits from integrated EV-ESS business line</li>
<li>PCM and green diesel the new game changer for palm oil-based business</li>
</ul>Risks:<ul><li>Raw material price fluctuation, Delays and failure of new project, Capital increase and EPS dilution</li></ul>Background: Energy Absolute Public Company Limited (EA) together with its subsidiaries engage in manufacturing and distribution of biodiesel &amp; glycerol products both domestically and overseas. Moreover, the company generates and sells electricity in Thailand from solar and wind energy sources totaling 664MWe. In addition, the company operates charging stations under the brand “EA Anywhere”, and conducts R&amp;D into electric vehicles (EV) and energy storage systems (ESS). The company was the first in Thailand to launch electric vehicles (under the brand “MINE Mobility”). EA was founded in 2006 and is headquartered in Bangkok.

We initiate coverage of EA with a BUY rating, based on a 2021E target price of Bt51, which is derived from a sum-of-the-parts (SOTP) methodology. Our valuation implies 0.8xPEG for 2021E, lower than the Thailand and World utilities sector’s 0.9x and 2.1x respectively.The story:
Secured stable income from power generation arm until 2023.
New S-curve driver from EV and ESS business
Synergy benefits from integrated EV-ESS business line
PCM and green diesel the new game changer for palm oil-based business
Risks:Raw material price fluctuation, Delays and failure of new project, Capital increase and EPS dilutionBackground: Energy Absolute Public Company Limited (EA) together with its subsidiaries engage in manufacturing and distribution of biodiesel &amp; glycerol products both domestically and overseas. Moreover, the company generates and sells electricity in Thailand from solar and wind energy sources totaling 664MWe. In addition, the company operates charging stations under the brand “EA Anywhere”, and conducts R&amp;D into electric vehicles (EV) and energy storage systems (ESS). The company was the first in Thailand to launch electric vehicles (under the brand “MINE Mobility”). EA was founded in 2006 and is headquartered in Bangkok.

EA: One of the Prime Beneficiary of Global EV Boom

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Thai Airways International / Equity Bottom-Up

Five interesting news/developments that could impact Thai equities:<ul>
<li>
Updates on Thai Airways restructuring. The Planner gives out details about potential merger with Thai Smile and who will likely call the shots (bondholders, Boeing, Airbus) in the long run.</li>
<li>
Four New Airports. Bhumjaithai's Transport Minister pushes AOT to expand four more airports even as passenger throughput falls by more than half. Some locations such as Buriram seem politically oriented but make less business sense.</li>
<li>
Debt Exploding, as budget deficits lead Thai government to authorize Bt214bn of new loans. Public debt to GDP could rise to 57% by next year, prompting the State to raise its debt ceiling above 60%.</li>
<li>
Everyone wants power! From PTT to EA, everyone wants a piece of the action in the power sector. Increasing stakes in power companies, running electric ferries on the Chao Phrya, you name it.</li>
<li>
TTA's Ship Comes Home. The shipper is guiding for a strong revenue growth of 31% and expansion of both its fleet and restaurant outlets.</li>
</ul>

Five interesting news/developments that could impact Thai equities:

Updates on Thai Airways restructuring. The Planner gives out details about potential merger with Thai Smile and who will likely call the shots (bondholders, Boeing, Airbus) in the long run.

Four New Airports. Bhumjaithai's Transport Minister pushes AOT to expand four more airports even as passenger throughput falls by more than half. Some locations such as Buriram seem politically oriented but make less business sense.

Debt Exploding, as budget deficits lead Thai government to authorize Bt214bn of new loans. Public debt to GDP could rise to 57% by next year, prompting the State to raise its debt ceiling above 60%.

Everyone wants power! From PTT to EA, everyone wants a piece of the action in the power sector. Increasing stakes in power companies, running electric ferries on the Chao Phrya, you name it.

TTA's Ship Comes Home. The shipper is guiding for a strong revenue growth of 31% and expansion of both its fleet and restaurant outlets.


Snippets #44: More Turbulence at THAI, Four New Airports!

Thailand

Energy Absolute Public Company Limited engages in the research, development, and production of biodiesel products in Thailand.

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Energy Absolute (EA TB)

Thailand Power Sector: Overweight-Bright 2021 Performance

Power Sector: Overweight-Bright 2021 sector performance. BCPG, GUNKUL, GULF top pick growth stocks. EGCO, RATCH top pick value stocks

Pi Securities PCL, Thailand

EA: EV-ESS Business Success to Drive Future Earnings

Yesterday analyst meeting come in a neutral tone. We maintain the BUY recommendation based on a target price of Bt49.0 derived using SOTP...

Pi Securities PCL, Thailand

EA: ESS Plant COD and EV Car Sales Delayed to 2021

We expect the delay of EA 1GWh ESS plant COD and EV-Car sales from 4Q20 to 1Q20 could pressure the stock performance in short-term. Thus recommend...

Pi Securities PCL, Thailand

EA: One of the Prime Beneficiary of Global EV Boom

We initiate coverage of EA with a BUY rating, based on a 2021E target price of Bt51, which is derived from a sum-of-the-parts (SOTP) methodology....

Pi Securities PCL, Thailand

Snippets #44: More Turbulence at THAI, Four New Airports!

Five interesting

Athaporn Arayasantiparb, CFA

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