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

Thanulux Public Company Limited manufactures garments and leatherwear under a variety of brand names, including Arrow, Guy Laroche and Louis Fontaine.

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Thanulux Public Co Ltd (TNL 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

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