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.

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Thematic (Sector/Industry)

In this review, we predict that Thai equities will rally in October and early November before another major correction in December with the Fed rate hike. In the short term, we expect Thai banks to do well, as they and Asian counterparts (eg. Singapore's DBS) benefit in terms of relative growth if the US banks are hampered by the regulator's decision to increase capital requirements of the largest banks. We also see two companies run by Thailand's second richest tycoon Charoen Sirivadhanabhakdi, namely BJC and Thai Beverage, outperforming companies run by the larger CP Group, primarily due to corporate action and a market's tilt towards consumers and retailing sectors. Needless to say, we will be tactically overweight on banks, retailers, and consumers over the next two months.We also discuss: 1) the overall upgrade of Thailand's growth expectations on the back of stronger domestic consumption; and 2) highight the government's five strategic sectors, named 'The 5 S-Curves'.

In this review, we predict that Thai equities will rally in October and early November before another major correction in December with the Fed rate hike. In the short term, we expect Thai banks to do well, as they and Asian counterparts (eg. Singapore's DBS) benefit in terms of relative growth if the US banks are hampered by the regulator's decision to increase capital requirements of the largest banks. We also see two companies run by Thailand's second richest tycoon Charoen Sirivadhanabhakdi, namely BJC and Thai Beverage, outperforming companies run by the larger CP Group, primarily due to corporate action and a market's tilt towards consumers and retailing sectors. Needless to say, we will be tactically overweight on banks, retailers, and consumers over the next two months.We also discuss: 1) the overall upgrade of Thailand's growth expectations on the back of stronger domestic consumption; and 2) highight the government's five strategic sectors, named 'The 5 S-Curves'.

American Capital Requirement Increase: Charoen and Thai Banks to Lead October Rally

Thailand

Textile Prestige Public Company Limited manufactures and wholesales raw materials used in manufacturing of women's underwear.  The Company's products include embroidered lace, hook and eye tape, elastic tape, shoulder pads and buttons under brand names of Peace, Ninie Lace, Topec and Staflex.

Textile Prestige Public Company Limited (TPCORP TB)

Rich Sport Public Company Limited, doing business as Converse, designs and distributes apparels and footwear products. The Company offers rubber and sport shoes, pants, jackets, t-shirts, bags, caps, socks, and other accessories. Converse serves customers in Thailand.

Thai Textile Industry Public Company Limited manufactures and distributes textile products including yarns and fabrics. The Company exports its products to many countries around the world including the USA, France, Germany, the United Kingdom, Hong Kong, South Korea, China and Australia.

Pranda Jewelry Public Company Limited manufactures, markets, and exports jewelry and gold accessories under Prima Gold brand name. The Company's products are sold domestically and exported to the US, England, France, Germany, Italy, Japan and Middle-East countries.

People's Garment Public Company Limited manufactures and distributes ready-made wear for all levels of consumers.  Brand names include Lacoste, Arrow, Anne Cole, Mizuno, Primo Lina, Catalina, and Arean. The Company is part of the Saha Group Company.

Chai Watana Tannery Group PCL tans, curries, and finishes buffalo hides and skins into leather. The Company also manufactures and distributes dog toys and furniture made from its leather products.

Pan Asia Footwear Public Company Limited manufactures and distributes athletic shoes and casual shoes under its own Pan brand name and a licensed brand name of Nike.

Castle Peak Holdings Public Company Limited manufactures casual jackets, coats, and ski-wear.  Additionally, the Company operates property development business through its subsidiaries.

Sawang Export Public Company Limited manufactures and exports precious stones and finished gold jewelry. Its customers include large gemstone traders from Japan, Hong Kong, USA, Canada, England, France, and Switzerland.

New Plus Knitting Public Company Limited manufactures and distributes pantyhose, stockings and socks.  The Company sells its products to local market.

Mainland Headwear Holdings Limited, through its subsidiaries, designs, manufactures, and sells casual headwear.  Products include baseball caps, bucket hats, winter caps, Gatsby hats, headbands, and sun visors which are made of fabric materials.  The Company exports its products to the US and European markets.

Cheviot Company Ltd. manufactures jute goods and HDPE goods.

Toung Loong Textile Manufacturing Co., Ltd. manufactures and markets yarns and sewing threads.

Ningbo Xianfeng New Material Company Limited develops, produces and sells molecular composite materials. The Company's main products include polymer materials, composite materials, polymer composites, polyester, glass fiber and PVC.

Poh Kong Holdings Berhad is an investment holding company. The Company, through its subsidiaries, manufactures and retails jewelry.

Ningxia Zhongyin Cashmere Co, Ltd. designs, produces, and markets cashmere sweaters and woolen fabrics. The Company also develops properties and produces non-ferrous metals and pharmaceuticals.

Ningxia Zhongyin Cashmere Co L (000982 CH)

Tri Ocean Textile Co., Ltd. manufactures and markets polyester fiber yarns.  The Company mainly sells its products in Taiwan and exports to other Asian countries and Europe.

UNITIKA LTD. manufactures and sells synthetic fibers and textile products used as apparel and industrial materials.  The Company specializes in cotton, nylon, wool, and polyester textiles.  UNITIKA also produces non-textile products such as chemical resins, films, and medical  products, and provides environmental engineering services.

Sarla Performance Fibers Limited manufactures and exports worldwide.  The Company produces sewing thread, half/hose socks, knitwear, woven labels, window lace, raschel &  levers, lace, hosiery yarns, medical textiles, narrow fabrics, woven fabrics, industrial yarns and hand knitted fabrics.

China Anchu Energy Storage Group Limited designs, manufactures, and sells menswear for the business casual and business formal segments. The Company conducts business in China.

Thai Wacoal Public Company Limited produces ladies' underwear, nightwear, and boutique fashions under a variety of brand names.  The Company also manufactures children's wear under Enfant, Chicco, Natty, Trombone, and Little Wacoal brand names.

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Thai Wacoal (WACOAL TB)

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

American Capital Requirement Increase: Charoen and Thai Banks to Lead October Rally

In this review, we predict that Thai equities will rally in October and early November before another major correction in December with the Fed...

Athaporn Arayasantiparb, CFA

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52-week Range

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