Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Thematic (Sector/Industry)

The military government has revived the "Shop Peau Chart" campaign which aims to spur retail spending in the last days of December 2016. We think the impact will be strong but very short term in nature, as it only benefits locals (not tourists) and is limited to certain items (no beer, cigarettes, insurance, or hotels yo!) that come with receipts. We also examine the existing SSS growth of Thai retailers and find upcountry Thailand to be particularly tepid. We continue to like BJC because we believe they have hit rock-bottom and will benefit from reduction in commercially destructive discount coupons. CP All's focus on small-ticket items means it will probably not benefit as much as mall operators and those who sell furniture (GLOBAL, Homepro) which sell bigger ticket items.

The military government has revived the "Shop Peau Chart" campaign which aims to spur retail spending in the last days of December 2016. We think the impact will be strong but very short term in nature, as it only benefits locals (not tourists) and is limited to certain items (no beer, cigarettes, insurance, or hotels yo!) that come with receipts. We also examine the existing SSS growth of Thai retailers and find upcountry Thailand to be particularly tepid. We continue to like BJC because we believe they have hit rock-bottom and will benefit from reduction in commercially destructive discount coupons. CP All's focus on small-ticket items means it will probably not benefit as much as mall operators and those who sell furniture (GLOBAL, Homepro) which sell bigger ticket items.

Reality Check IV: Can "Shop Peau Chart" Revive Thai Retailing?

Independent Insight Provider

Stewart Paterson

Taurus Advisors LLP

Macroeconomics

The Thai consumer faces many headwinds: The household sector is more leveraged than in prior cycles; Thai export performance has been poor and employment growth has been weak. A weakening RMB may put downward pressure on real wages region-wide as Chinese labour costs shrink in Dollar terms. There has been a secular slowdown in consumption growth and what is more within that, retail is losing share.Many Thai consumer related shares are commanding valuations way in excess of those they had when their growth prospects were considerably better. Gearing levels are higher in my view than the market cares to acknowledge and there is the ever present threat of disruption from e-commerce. IRRs on these shares are likely to be very low over the long-run given current prices  in my view. Vulnerable stocks could include <a href="https://www.smartkarma.com/entities/9906" target="_blank" data-smartkarma-citation="entities:9906:1">Home Product Center Pcl (HMPRO TB)</a>; <a href="https://www.smartkarma.com/entities/19449" target="_blank" data-smartkarma-citation="entities:19449:1">Siam Global House Pcl (GLOBAL TB)</a>; <a href="https://www.smartkarma.com/entities/17188" target="_blank" data-smartkarma-citation="entities:17188:1">Central Pattana Pub Co Ltd (CPN TB)</a>; and <a href="https://www.smartkarma.com/entities/13889" target="_blank" data-smartkarma-citation="entities:13889:1">CP All PCL (CPALL TB)</a> in my view.Renewed Dollar strength /Baht weakness; the release of economic data post the King's passing and the rise in EMBI spreads generally and Thai yields specifically are all potential short term catalysts for the market to re-assess current valuations.

The Thai consumer faces many headwinds: The household sector is more leveraged than in prior cycles; Thai export performance has been poor and employment growth has been weak. A weakening RMB may put downward pressure on real wages region-wide as Chinese labour costs shrink in Dollar terms. There has been a secular slowdown in consumption growth and what is more within that, retail is losing share.Many Thai consumer related shares are commanding valuations way in excess of those they had when their growth prospects were considerably better. Gearing levels are higher in my view than the market cares to acknowledge and there is the ever present threat of disruption from e-commerce. IRRs on these shares are likely to be very low over the long-run given current prices  in my view. Vulnerable stocks could include Home Product Center Pcl (HMPRO TB); Siam Global House Pcl (GLOBAL TB); Central Pattana Pub Co Ltd (CPN TB); and CP All PCL (CPALL TB) in my view.Renewed Dollar strength /Baht weakness; the release of economic data post the King's passing and the rise in EMBI spreads generally and Thai yields specifically are all potential short term catalysts for the market to re-assess current valuations.

Macro to Micro: Thai Consumption Has Stagnated. Consumer Stocks Are near Record Valuations- Hmm.

Thailand

Malee Group Public Company Limited produces and exports canned food and drink products including fruits, fruit juices, juice concentrate, vegetables and meat under its Malee, First Choice, Hunter and Farmer brand names.

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Malee Group PCL (MALEE TB)

Reality Check IV: Can "Shop Peau Chart" Revive Thai Retailing?

The military government has revived the "Shop Peau Chart" campaign which aims to spur retail spending in the last days of December 2016. We think...

Athaporn Arayasantiparb, CFA

Macro to Micro: Thai Consumption Has Stagnated. Consumer Stocks Are near Record Valuations- Hmm.

The Thai consumer faces many headwinds: The household sector is more leveraged than in prior cycles; Thai export performance has been poor and...

Stewart Paterson

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Market Cap (USDm)

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