Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Equity Bottom-Up

<ul><li>We raise our rating to Buy (previously Neutral) with a more positive view on the fundamental valuation (upgraded to buy from overvalued).</li><li>This reflects that KCE’s stock underperformance (- 23% vs. the SET at +11%) over the past three months has largely priced in the weak 3Q24 results while also accounting for the potential risk of earnings forecast revisions.</li><li>The stock entails limited tactical downside risk, as the current stock price is trading at a discount to its fair value compared to the 6-month historical average.</li></ul>

We raise our rating to Buy (previously Neutral) with a more positive view on the fundamental valuation (upgraded to buy from overvalued).This reflects that KCE’s stock underperformance (- 23% vs. the SET at +11%) over the past three months has largely priced in the weak 3Q24 results while also accounting for the potential risk of earnings forecast revisions.The stock entails limited tactical downside risk, as the current stock price is trading at a discount to its fair value compared to the 6-month historical average.

Kce Electronics - 3Q24 Earnings Impacted by Stronger Baht

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The SET50 index tracks the performance of the top 50 largest and most liquid names listed on the Stock Exchange of Thailand (SET).</li>
<li>In this insight, we take a look at the potential ADDs/DELs for SET 50 during the index rebal event in December 2024.</li>
<li>At present, we see 3 ADDs and 3 DELs but since the reference period is yet to start, the rankings can fluctuate significantly before the base date.</li>
</ul>


The SET50 index tracks the performance of the top 50 largest and most liquid names listed on the Stock Exchange of Thailand (SET).
In this insight, we take a look at the potential ADDs/DELs for SET 50 during the index rebal event in December 2024.
At present, we see 3 ADDs and 3 DELs but since the reference period is yet to start, the rankings can fluctuate significantly before the base date.


Quiddity Leaderboard SET50 Dec 24: 3 Changes Likely; INTUCH-GULF Merger Should Be Monitored

<ul><li>We maintain our Neutral recommendation and the FY2024E fair value of Bt35.50. KCE’s core earnings grew YoY and QoQ in 1Q24, mainly from a rebound in the gross margin.</li><li>The result was slightly above our expectation, comprising 25% of our FY2024E forecast.</li><li>While we maintain our Neutral recommendation, our valuation metrics indicate that it could be upgraded to Outperform, especially as the current valuation has been upgraded to overvalued from sell previously. </li></ul>

We maintain our Neutral recommendation and the FY2024E fair value of Bt35.50. KCE’s core earnings grew YoY and QoQ in 1Q24, mainly from a rebound in the gross margin.The result was slightly above our expectation, comprising 25% of our FY2024E forecast.While we maintain our Neutral recommendation, our valuation metrics indicate that it could be upgraded to Outperform, especially as the current valuation has been upgraded to overvalued from sell previously. 

Kce Electronics - Earnings Growth in 1Q24 Driven by Strong Gross Margin

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

<ul>
<li>Two thirds of the way through the review period, we see one change for 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">SET 50 Index</a> in December with <a href="https://www.smartkarma.com/entities/kce-electronics-pcl" target="_blank" data-smartkarma-citation="entities:1892:1" rel="noopener">KCE Electronics (KCE TB)</a> replacing <a href="https://www.smartkarma.com/entities/ngern-tid-lor-pcl" target="_blank" data-smartkarma-citation="entities:31103:1" rel="noopener">Ngern Tid Lor (TIDLOR TB)</a>. </li>
<li>There is one close change where <a href="https://www.smartkarma.com/entities/i-tail-corp-pcl" target="_blank" data-smartkarma-citation="entities:36428:1" rel="noopener">I-TAIL (ITC TB)</a> could replace <a href="https://www.smartkarma.com/entities/srisawad-corp-pcl" target="_blank" data-smartkarma-citation="entities:9480:1" rel="noopener">Srisawad Power 1979 (SAWAD TB)</a> in the index.</li>
<li>
<a href="https://www.smartkarma.com/entities/delta-electronics-thailand-pcl-98806732-8ac4-42b2-a565-ba32673d1e5a" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thailand (DELTA TB)</a> is unlikely to be deleted while <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> fails liquidity and is unlikely to be added.</li>
</ul>


Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB). 
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.

Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.


SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

<ul><li>We initiate our coverage on KCE with a Neutral rating and a FY2024E fair value of Bt35.50, based on a required rate of return of 4.91%.</li><li>While we believe KCE’s FY2024E core earnings will rebound to Bt2.1bn (+20% YoY), driven by cost savings, product mix improvement, and increased sales, we view the current valuation as unfavorable.</li><li>Our model also suggests that KCE’s valuation will remain unattractive until FY2025E (FV: Bt40.75), and a rerating to a Buy would only be possible in FY2026E (FV: Bt52.50) on the back of continued EV momentum and demand for safety auxiliary systems (ADAS) driving KCE’s sales.</li></ul>

We initiate our coverage on KCE with a Neutral rating and a FY2024E fair value of Bt35.50, based on a required rate of return of 4.91%.While we believe KCE’s FY2024E core earnings will rebound to Bt2.1bn (+20% YoY), driven by cost savings, product mix improvement, and increased sales, we view the current valuation as unfavorable.Our model also suggests that KCE’s valuation will remain unattractive until FY2025E (FV: Bt40.75), and a rerating to a Buy would only be possible in FY2026E (FV: Bt52.50) on the back of continued EV momentum and demand for safety auxiliary systems (ADAS) driving KCE’s sales.

Kce Electronics - Cost Savings and Product Mix Should Help Earnings Recover

Thailand

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.

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KCE Electronics PCL (KCE TB)

Kce Electronics - 3Q24 Earnings Impacted by Stronger Baht

We raise our rating to Buy (previously Neutral) with a more positive view on the fundamental valuation (upgraded to buy from overvalued).

Krungthai XSpring

Quiddity Leaderboard SET50 Dec 24: 3 Changes Likely; INTUCH-GULF Merger Should Be Monitored

Although there are only three changes expected right now, there are multiple names just outside the border requiring small relative price changes...

Janaghan Jeyakumar, CFA

Kce Electronics - Earnings Growth in 1Q24 Driven by Strong Gross Margin

We maintain our Neutral recommendation and the FY2024E fair value of Bt35.50. KCE’s core earnings grew YoY and QoQ in 1Q24, mainly from a rebound...

Krungthai XSpring

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

KCE could replace TIDLOR in the SET50 in Dec. ITC is a close add and could replace SAWAD. The impact on the stocks is big given the index is...

Brian Freitas

Kce Electronics - Cost Savings and Product Mix Should Help Earnings Recover

We initiate our coverage on KCE with a Neutral rating and a FY2024E fair value of Bt35.50, based on a required rate of return of 4.91%.

Krungthai XSpring

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