Thailand

In this briefing:

1. China – Eurozone Negative Feedback Loop.
2. The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee
3. JKN: 4Q18 Earnings Grew Both YoY and QoQ

1. China – Eurozone Negative Feedback Loop.

Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit,  this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China. 

2. The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee

Macro Insights

In Widodo’s Generals Take Fire / Anti-Foreign Rhetoric Takes Toll / Land Hampers Adhi’s LRT / MRT Near, CrossASEAN Insight Provider Kevin O’Rourke provides his value-added views on political and economic developments in Indonesia over the last week. 

In Asia’s External Balances Signal Safety for Investors, Dr Jim Walker takes a close look at Asian currencies, their performance over the last year and highlights some interesting misperceptions. 

Equity Bottom-Up Insights

In Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA, CrossASEAN Insight provider Nicolas Van Broekhoven revisits Procurri Corporation (PROC SP) and finds an overhang lifted for the stock.  

In Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring, Angus Mackintosh revisits this leading Indonesian media company and finds it on the cusp of a more digital future. 

In Blue Bird (BIRD IJ) – Transport Wizzard with a Twist, Angus Mackintosh revisits Indonesia’s leading taxi company after a meeting with management and comes back with some positive newsflow. 

In Sea Ltd: Further Share Re-Rating After a 35% Daily Gain? Why Not?, Johannes Salim, CFA circles back to Sea Ltd (SE US) after the post-results call with management. 

In Bank Danamon Goes Ex-Rights, Travis Lundy circles back to the ongoing merger between Bank Danamon Indonesia (BDMN IJ) and Mitsubishi Ufj Financial (8306 JP). 

In BIMB: Market Gives Thumbs-Up to Results, Paul Hollingworth takes a close look at this Malaysian Bank. Bimb Holdings (BIMB MK) or BHB commands two subsidiaries, Bank Islam and Takaful Malaysia.

In Golden Land: Less An Offer, More A Consolidation Of Interests, event-driven specialist David Blennerhassett revisits this ongoing takeover situation. 

In Ho Bee Land – 4Q Earnings Hit by Unexpected Tax Provision, Royston Foo revisits the company post recent results. 

In SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019, our friend at Country Group comment on Synnex Thailand (SYNEX TB) following recent numbers. 

In PRM: Thai Largest Tanker Fleets Assured of Consistent Growth, Country Group initiates coverage on Prima Marine PCL (PRM TB) with a BUY rating. 

Sector and Thematic Insights

In INDO Snippets: Second Presidential Debate, BNLI & PNBN – This Time Is Real?, CrossASEAN Insight provider Jessica Irene provides us with substantive and significant on the ground chatter that may potentially have a meaningful impact on the Indonesian Equity Market. This week she comments on the second presidential debate, Bank Permata (BNLI IJ) stake sale rumours, as well as ANZ’s potential disposal of its stake in Bank Pan Indonesia (PNBN IJ). 

In Jakarta Trip – On the Ground Insight Feb 2019, CrossASEAN Insight Provider Henry Soediarko provides us with his value-added on the ground comments following a trip to Jakarta. 

In Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class, Anni Kum puts out her fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, she examines Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign workforce policy.

3. JKN: 4Q18 Earnings Grew Both YoY and QoQ

The company’s 4Q18 net profit was at Bt46m (+298%YoY and +8%QoQ). The result was in line with our 2018 forecast and accounted for 97% of our full-year forecast.

• A YoY surge in earnings was due to a 30% increase in revenue to Bt360m, mainly from export revenue (50% revenue contribution in 3Q18 from 0% in 4Q17). A QoQ gain was caused a reduction in extra expenses for holding an annual event ‘JKN mega showcase’ in early August.
• 2019 earnings outlook is still decent on the back of 1.) higher revenue contribution from export market especially South East Asia (26% of revenue in 2018), 2.) CNBC studio commencement in 2Q19, and, 3.) revenue recognition from new channel subscribers (No.5, Thairath, Spring news, True4U, Nation and MONO)

We maintain our forecast and BUY rating for JKN with a target price of Bt8.80 based on 14.8xPE’19E mean of the Asia ex-Japan Consumer Discretionary Sector.

In this briefing:

1. China’s New Semiconductor Thrust – Part 1: Why and How?
2. The Week that Was in ASEAN@Smartkarma – Elections, Trade War Beneficiaries, and Indonesian Textiles
3. Political Pit Stop (April): An Election Gridlock
4. Bull Or Bear? Latest Global Liquidity Readings
5. Risk of Future LNG Supply Glut as Bubble of New Projects Grows

1. China’s New Semiconductor Thrust – Part 1: Why and How?

China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities.  This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.

In the first part of this series we will see what motivated China to enter the market and how it plans to do so.

2. The Week that Was in ASEAN@Smartkarma – Elections, Trade War Beneficiaries, and Indonesian Textiles

Macro Insights

In Prayuth Accomplishes a Clear-Cut Victory, Assuring Stability (If Not Rapid Growth), CrossASEAN Insight Provider Prasenjit K. Basu comments on the result of the recent election in Thailand. 

In Thai Election 2019: Defeat in Parliament, Victory in Senate, Thai Guru Athaporn Arayasantiparb, CFA comments on the results on the Thai elections and the consequences for decision making in that country. 

In a follow-up Insight on the recent election in Thailand, Political Pit Stop (April): An Election Gridlock, Athaporn Arayasantiparb, CFA deals with some unfinished business post the election.

In Elections, Coups and Constitutions: Thailand’s Reckoning, Dr. Jim Walker looks at Thailand’s political history with the recent election in mind and concludes that Thai politics looks set to become fractious and interesting once again. 

In his insight, 18pt Lead Mitigates Prabowo-Related Risk / Islamic Parties Declining / PRC Textile Plan / 4th Debate, Kevin O’Rourke looks and the most important political and economic developments over the past week and provides his value-added comment. 

In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.  

Equity Bottom-Up Insights

In his most recent on-the-ground insight, Shaky Situations at DEMCO and Pranda, Athaporn Arayasantiparb, CFA lays out his thoughts post visits to two companies with very different trajectories, namely renewable power specialist Demco Pcl (DEMCO TB), which is struggling, despite doing really well in the past and jeweller Pranda Jewelry Pub (PRANDA TB), once struggling but now on a recovery path. 

In Golden Agri Bull Pivots to Get Involved, technical specialist Thomas Schroeder works his magic on this leading Singapore listed plantation company.

For a fundamental view on the above situations please refer to last week’s insight, Golden Agri: El Nino Back on the Front Burner; Bullish Catalyst for GAR, from commodities specialist Charles Spencer who zeros on the potential positive impact from an impending El Nino event on Golden Agri Resources (GGR SP). 

Sector and Thematic Insights

In Small Cap Diary: Rajthanee Hospital, CAZ, Athaporn Arayasantiparb, CFA lays out his thoughts post visits to these two small-cap companies from totally different industries Rajthanee Hospital (RJH TB) and CAZ Thailand PCL (CAZ TB). 

3. Political Pit Stop (April): An Election Gridlock

Despite the election being over on March 24, Thailand has a few unfinished business to attend to:

• EC impeachment. Many irregularities were found in the election and ballot boxes both inside and outside Thailand, prompting a move to impeach the Election Committee for a job poorly done.
• The two alliances. After the count, the Thaksinite lead over Army faction widens, and a number of parties have committed to their cause. Yet, the Senate will vote for Gen Prayuth with overwhelming majority. Whoever wins (our bet is still on the Army), it will be hard-won and unlikely confirmed until the May deadline.
• The fence sitters. The Democrats went back on their earlier move to the Thaksinite camp, while the swing vote parties, led by Bhumjaithai, continue to bide for time. Without their decision, it is impossible to announce a winner, although it is beleived they will eventually side with the incumbent.
• New round of mud slinging. The Army faction attacks Thaksin for disrespect, while the Thaksinites, though already leading in polls, claim the ballot boxes were tampered.

In light of this, the only safe ‘political’ stocks to play are those likely to benefit regardless of who wins, such as STEC and TSC. An extended political gridlock is also likely to weigh down the market until May, when we expect it to be resolved.

4. Bull Or Bear? Latest Global Liquidity Readings

• Global Liquidity bottoming out, but Central Banks not yet easing
• US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
• PBoC still tightening through OMOs
• ECB  on ‘pause’
• QE4 is coming in 2019, but no evidence it has started yet

5. Risk of Future LNG Supply Glut as Bubble of New Projects Grows

The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).

In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.

The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.

Exhibit 1: Funnel of proposed LNG projects getting bigger

In this briefing:

1. The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee
2. JKN: 4Q18 Earnings Grew Both YoY and QoQ

1. The Week that Was in ASEAN@Smartkarma – Asian Currencies, Indonesian Media, and Shopee

Macro Insights

In Widodo’s Generals Take Fire / Anti-Foreign Rhetoric Takes Toll / Land Hampers Adhi’s LRT / MRT Near, CrossASEAN Insight Provider Kevin O’Rourke provides his value-added views on political and economic developments in Indonesia over the last week. 

In Asia’s External Balances Signal Safety for Investors, Dr Jim Walker takes a close look at Asian currencies, their performance over the last year and highlights some interesting misperceptions. 

Equity Bottom-Up Insights

In Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA, CrossASEAN Insight provider Nicolas Van Broekhoven revisits Procurri Corporation (PROC SP) and finds an overhang lifted for the stock.  

In Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring, Angus Mackintosh revisits this leading Indonesian media company and finds it on the cusp of a more digital future. 

In Blue Bird (BIRD IJ) – Transport Wizzard with a Twist, Angus Mackintosh revisits Indonesia’s leading taxi company after a meeting with management and comes back with some positive newsflow. 

In Sea Ltd: Further Share Re-Rating After a 35% Daily Gain? Why Not?, Johannes Salim, CFA circles back to Sea Ltd (SE US) after the post-results call with management. 

In Bank Danamon Goes Ex-Rights, Travis Lundy circles back to the ongoing merger between Bank Danamon Indonesia (BDMN IJ) and Mitsubishi Ufj Financial (8306 JP). 

In BIMB: Market Gives Thumbs-Up to Results, Paul Hollingworth takes a close look at this Malaysian Bank. Bimb Holdings (BIMB MK) or BHB commands two subsidiaries, Bank Islam and Takaful Malaysia.

In Golden Land: Less An Offer, More A Consolidation Of Interests, event-driven specialist David Blennerhassett revisits this ongoing takeover situation. 

In Ho Bee Land – 4Q Earnings Hit by Unexpected Tax Provision, Royston Foo revisits the company post recent results. 

In SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019, our friend at Country Group comment on Synnex Thailand (SYNEX TB) following recent numbers. 

In PRM: Thai Largest Tanker Fleets Assured of Consistent Growth, Country Group initiates coverage on Prima Marine PCL (PRM TB) with a BUY rating. 

Sector and Thematic Insights

In INDO Snippets: Second Presidential Debate, BNLI & PNBN – This Time Is Real?, CrossASEAN Insight provider Jessica Irene provides us with substantive and significant on the ground chatter that may potentially have a meaningful impact on the Indonesian Equity Market. This week she comments on the second presidential debate, Bank Permata (BNLI IJ) stake sale rumours, as well as ANZ’s potential disposal of its stake in Bank Pan Indonesia (PNBN IJ). 

In Jakarta Trip – On the Ground Insight Feb 2019, CrossASEAN Insight Provider Henry Soediarko provides us with his value-added on the ground comments following a trip to Jakarta. 

In Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class, Anni Kum puts out her fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, she examines Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign workforce policy.

2. JKN: 4Q18 Earnings Grew Both YoY and QoQ

The company’s 4Q18 net profit was at Bt46m (+298%YoY and +8%QoQ). The result was in line with our 2018 forecast and accounted for 97% of our full-year forecast.

• A YoY surge in earnings was due to a 30% increase in revenue to Bt360m, mainly from export revenue (50% revenue contribution in 3Q18 from 0% in 4Q17). A QoQ gain was caused a reduction in extra expenses for holding an annual event ‘JKN mega showcase’ in early August.
• 2019 earnings outlook is still decent on the back of 1.) higher revenue contribution from export market especially South East Asia (26% of revenue in 2018), 2.) CNBC studio commencement in 2Q19, and, 3.) revenue recognition from new channel subscribers (No.5, Thairath, Spring news, True4U, Nation and MONO)

We maintain our forecast and BUY rating for JKN with a target price of Bt8.80 based on 14.8xPE’19E mean of the Asia ex-Japan Consumer Discretionary Sector.

In this briefing:

1. The Week that Was in ASEAN@Smartkarma – Elections, Trade War Beneficiaries, and Indonesian Textiles
2. Political Pit Stop (April): An Election Gridlock
3. Bull Or Bear? Latest Global Liquidity Readings
4. Risk of Future LNG Supply Glut as Bubble of New Projects Grows
5. Shaky Situations at DEMCO and Pranda

1. The Week that Was in ASEAN@Smartkarma – Elections, Trade War Beneficiaries, and Indonesian Textiles

Macro Insights

In Prayuth Accomplishes a Clear-Cut Victory, Assuring Stability (If Not Rapid Growth), CrossASEAN Insight Provider Prasenjit K. Basu comments on the result of the recent election in Thailand. 

In Thai Election 2019: Defeat in Parliament, Victory in Senate, Thai Guru Athaporn Arayasantiparb, CFA comments on the results on the Thai elections and the consequences for decision making in that country. 

In a follow-up Insight on the recent election in Thailand, Political Pit Stop (April): An Election Gridlock, Athaporn Arayasantiparb, CFA deals with some unfinished business post the election.

In Elections, Coups and Constitutions: Thailand’s Reckoning, Dr. Jim Walker looks at Thailand’s political history with the recent election in mind and concludes that Thai politics looks set to become fractious and interesting once again. 

In his insight, 18pt Lead Mitigates Prabowo-Related Risk / Islamic Parties Declining / PRC Textile Plan / 4th Debate, Kevin O’Rourke looks and the most important political and economic developments over the past week and provides his value-added comment. 

In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.  

Equity Bottom-Up Insights

In his most recent on-the-ground insight, Shaky Situations at DEMCO and Pranda, Athaporn Arayasantiparb, CFA lays out his thoughts post visits to two companies with very different trajectories, namely renewable power specialist Demco Pcl (DEMCO TB), which is struggling, despite doing really well in the past and jeweller Pranda Jewelry Pub (PRANDA TB), once struggling but now on a recovery path. 

In Golden Agri Bull Pivots to Get Involved, technical specialist Thomas Schroeder works his magic on this leading Singapore listed plantation company.

For a fundamental view on the above situations please refer to last week’s insight, Golden Agri: El Nino Back on the Front Burner; Bullish Catalyst for GAR, from commodities specialist Charles Spencer who zeros on the potential positive impact from an impending El Nino event on Golden Agri Resources (GGR SP). 

Sector and Thematic Insights

In Small Cap Diary: Rajthanee Hospital, CAZ, Athaporn Arayasantiparb, CFA lays out his thoughts post visits to these two small-cap companies from totally different industries Rajthanee Hospital (RJH TB) and CAZ Thailand PCL (CAZ TB). 

2. Political Pit Stop (April): An Election Gridlock

Despite the election being over on March 24, Thailand has a few unfinished business to attend to:

• EC impeachment. Many irregularities were found in the election and ballot boxes both inside and outside Thailand, prompting a move to impeach the Election Committee for a job poorly done.
• The two alliances. After the count, the Thaksinite lead over Army faction widens, and a number of parties have committed to their cause. Yet, the Senate will vote for Gen Prayuth with overwhelming majority. Whoever wins (our bet is still on the Army), it will be hard-won and unlikely confirmed until the May deadline.
• The fence sitters. The Democrats went back on their earlier move to the Thaksinite camp, while the swing vote parties, led by Bhumjaithai, continue to bide for time. Without their decision, it is impossible to announce a winner, although it is beleived they will eventually side with the incumbent.
• New round of mud slinging. The Army faction attacks Thaksin for disrespect, while the Thaksinites, though already leading in polls, claim the ballot boxes were tampered.

In light of this, the only safe ‘political’ stocks to play are those likely to benefit regardless of who wins, such as STEC and TSC. An extended political gridlock is also likely to weigh down the market until May, when we expect it to be resolved.

3. Bull Or Bear? Latest Global Liquidity Readings

• Global Liquidity bottoming out, but Central Banks not yet easing
• US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
• PBoC still tightening through OMOs
• ECB  on ‘pause’
• QE4 is coming in 2019, but no evidence it has started yet

4. Risk of Future LNG Supply Glut as Bubble of New Projects Grows

The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).

In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.

The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.

Exhibit 1: Funnel of proposed LNG projects getting bigger

5. Shaky Situations at DEMCO and Pranda

We visited two companies with very different trajectories. 

• Renewable power specialist DEMCO is struggling, despite doing really well in the past, while jeweler Pranda, once struggling, is on the recovery path.
• DEMCO reported gross profit and revenue decline of 8% and 7% respectively. Their earnings more than doubled, but that’s solely due to dividends from Wind Energy, an investment that cost them Bt800m and is embroiled in scandal.
• Pranda’s operating cash flows surged from Bt12m to Bt230m, as they restructured their store network.
• We’d still be caution on PDJ, as management doesn’t feel the restructuring is over. More stores could be closed down in the future.

In this briefing:

1. JKN: 4Q18 Earnings Grew Both YoY and QoQ

1. JKN: 4Q18 Earnings Grew Both YoY and QoQ

The company’s 4Q18 net profit was at Bt46m (+298%YoY and +8%QoQ). The result was in line with our 2018 forecast and accounted for 97% of our full-year forecast.

• A YoY surge in earnings was due to a 30% increase in revenue to Bt360m, mainly from export revenue (50% revenue contribution in 3Q18 from 0% in 4Q17). A QoQ gain was caused a reduction in extra expenses for holding an annual event ‘JKN mega showcase’ in early August.
• 2019 earnings outlook is still decent on the back of 1.) higher revenue contribution from export market especially South East Asia (26% of revenue in 2018), 2.) CNBC studio commencement in 2Q19, and, 3.) revenue recognition from new channel subscribers (No.5, Thairath, Spring news, True4U, Nation and MONO)

We maintain our forecast and BUY rating for JKN with a target price of Bt8.80 based on 14.8xPE’19E mean of the Asia ex-Japan Consumer Discretionary Sector.

In this briefing:

1. Political Pit Stop (April): An Election Gridlock
2. Bull Or Bear? Latest Global Liquidity Readings
3. Risk of Future LNG Supply Glut as Bubble of New Projects Grows
4. Shaky Situations at DEMCO and Pranda
5. The Dollar IS the Story; Gold Confounds, A Brexit Rabbit Hole; EUR Punished

1. Political Pit Stop (April): An Election Gridlock

Despite the election being over on March 24, Thailand has a few unfinished business to attend to:

• EC impeachment. Many irregularities were found in the election and ballot boxes both inside and outside Thailand, prompting a move to impeach the Election Committee for a job poorly done.
• The two alliances. After the count, the Thaksinite lead over Army faction widens, and a number of parties have committed to their cause. Yet, the Senate will vote for Gen Prayuth with overwhelming majority. Whoever wins (our bet is still on the Army), it will be hard-won and unlikely confirmed until the May deadline.
• The fence sitters. The Democrats went back on their earlier move to the Thaksinite camp, while the swing vote parties, led by Bhumjaithai, continue to bide for time. Without their decision, it is impossible to announce a winner, although it is beleived they will eventually side with the incumbent.
• New round of mud slinging. The Army faction attacks Thaksin for disrespect, while the Thaksinites, though already leading in polls, claim the ballot boxes were tampered.

In light of this, the only safe ‘political’ stocks to play are those likely to benefit regardless of who wins, such as STEC and TSC. An extended political gridlock is also likely to weigh down the market until May, when we expect it to be resolved.

2. Bull Or Bear? Latest Global Liquidity Readings

• Global Liquidity bottoming out, but Central Banks not yet easing
• US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
• PBoC still tightening through OMOs
• ECB  on ‘pause’
• QE4 is coming in 2019, but no evidence it has started yet

3. Risk of Future LNG Supply Glut as Bubble of New Projects Grows

The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).

In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.

The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.

Exhibit 1: Funnel of proposed LNG projects getting bigger

4. Shaky Situations at DEMCO and Pranda

We visited two companies with very different trajectories. 

• Renewable power specialist DEMCO is struggling, despite doing really well in the past, while jeweler Pranda, once struggling, is on the recovery path.
• DEMCO reported gross profit and revenue decline of 8% and 7% respectively. Their earnings more than doubled, but that’s solely due to dividends from Wind Energy, an investment that cost them Bt800m and is embroiled in scandal.
• Pranda’s operating cash flows surged from Bt12m to Bt230m, as they restructured their store network.
• We’d still be caution on PDJ, as management doesn’t feel the restructuring is over. More stores could be closed down in the future.

5. The Dollar IS the Story; Gold Confounds, A Brexit Rabbit Hole; EUR Punished

• The dollar IS the story
• EUR punished for negative yields
• Chasing Brexit down a rabbit hole
• Gold confounds
• Bitcoin at an interesting juncture

The fact that the dollar has strengthened despite the dovish turn at the Fed this year and the significant fall in US rates and bond yields has confounded many analysts.

In this briefing:

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal

In this briefing:

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
2. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal

2. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town

A meeting Surya Citra Media Pt Tbk (SCMA IJ) in Jakarta found management in a relatively ebullient mood. The share price performance has been slightly perplexing the fact that its digital strategy is close to coming to fruition, with upcoming acquisitions representing a positive catalyst.

The company will move forward on acquiring controlling stakes in digital streaming player www.vidio.com, internet company www.kapanlagi.com, and out of home media advertising player EYE Indonesia.

Total revenues from the digital and non-TV space will grow from less than 5% of SCMA’s total revenue to nearly 20% of the total, making it the biggest player in both free-to-air and a major player in digital adverting in Indonesia.

Vidio.com is especially interesting given how fragmented that market is currently. Iy=t already has 22m active users viewing its sport and local content but is looking to bring in a major global player to help finance original content and bring in more international content. 

Internet companies represent the biggest and fastest growing advertising customers outside FMCG. They are increasingly paying above market rates for up to two-hour exclusive slots on prime time, where they air their own programming which allows them to engage with the audience. 

The recent Kraft Heinz Co (KHC US) debacle may signal the end of zero-based budgeting, which may mean global players such as Unilever Indonesia (UNVR IJ) start to spend more on advertising. in the meantime, local FMCG players remain more aggressive on advertising their products on TV. 

Surya Citra Media Pt Tbk (SCMA IJ) remains the best quality proxy to the advertising market in Indonesia. The upcoming acquisitions in the digital space represent strong potential catalysts for the stock, which have not yet been factored into valuations. Its core business continues to register stable and rising growth, especially from local FMCG players, with the re-entry of the tobacco companies potentially representing another boon for this year, given there has been no excise tax increase. According to Capital IQ consensus, the company is trading on 15.3x FY19E PER and 13.8x FY20E PER, with forecasts EPS growth of +8.5% and +10.5% for FY19E and FY20E respectively.  The company is forecast to achieve an ROE of 33% in 2019, with a dividend yield of 4.2%. 

In this briefing:

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
2. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town
3. Global EM Special: Andean Condors Vs Asian Elephants – Where Is the Growth in EM?

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal

2. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town

A meeting Surya Citra Media Pt Tbk (SCMA IJ) in Jakarta found management in a relatively ebullient mood. The share price performance has been slightly perplexing the fact that its digital strategy is close to coming to fruition, with upcoming acquisitions representing a positive catalyst.

The company will move forward on acquiring controlling stakes in digital streaming player www.vidio.com, internet company www.kapanlagi.com, and out of home media advertising player EYE Indonesia.

Total revenues from the digital and non-TV space will grow from less than 5% of SCMA’s total revenue to nearly 20% of the total, making it the biggest player in both free-to-air and a major player in digital adverting in Indonesia.

Vidio.com is especially interesting given how fragmented that market is currently. Iy=t already has 22m active users viewing its sport and local content but is looking to bring in a major global player to help finance original content and bring in more international content. 

Internet companies represent the biggest and fastest growing advertising customers outside FMCG. They are increasingly paying above market rates for up to two-hour exclusive slots on prime time, where they air their own programming which allows them to engage with the audience. 

The recent Kraft Heinz Co (KHC US) debacle may signal the end of zero-based budgeting, which may mean global players such as Unilever Indonesia (UNVR IJ) start to spend more on advertising. in the meantime, local FMCG players remain more aggressive on advertising their products on TV. 

Surya Citra Media Pt Tbk (SCMA IJ) remains the best quality proxy to the advertising market in Indonesia. The upcoming acquisitions in the digital space represent strong potential catalysts for the stock, which have not yet been factored into valuations. Its core business continues to register stable and rising growth, especially from local FMCG players, with the re-entry of the tobacco companies potentially representing another boon for this year, given there has been no excise tax increase. According to Capital IQ consensus, the company is trading on 15.3x FY19E PER and 13.8x FY20E PER, with forecasts EPS growth of +8.5% and +10.5% for FY19E and FY20E respectively.  The company is forecast to achieve an ROE of 33% in 2019, with a dividend yield of 4.2%. 

3. Global EM Special: Andean Condors Vs Asian Elephants – Where Is the Growth in EM?

Global growth is expected to slow over the coming quarters, possibly years – and emerging market economies are certainly not immune from this. Nevertheless, within this diverse universe, the pace of deceleration will be uneven. Whilst some “open” EM economies are generally synchronized with growth dynamics in the rest of the world, others will be shielded by a combination of idiosyncratic forces – including renewed accommodative (monetary and fiscal) policies, cyclical recovery or upswing in domestic growth drivers and – for some – positive political developments and reform progress. Still, other EMs are less fortunate and a growth deceleration is likely to deepen in the near-term – held back by less policy flexibility, political uncertainty and various domestic or external shocks.

With 4Q18 GDP growth reports underway, we sifted through – and synthesized – various growth indicators to introduce a “Growth-Profile Framework” (GPF) to systematically evaluate – and rank – growth profiles in a data-driven, automated and standardized manner. The “GPF” not only takes into account GDP for the most recently-reported four quarters but also forward-looking forecasts and the latest economist revisions, which often take into account the latest data surprises and other material developments.

The observation universe is the “Emerging Markets-25” (EM-25) of large, investable EM countries most often found in benchmark indices such as MSCI EM and JPMorgan (GBI-EM and EMBI) indices. This opportunity set offers a breadth of diversity spanning across Asia, EMEA and LatAm and different stages of development. 

Highlights: 

• Introducing the “EM-25” Growth Profile Framework: This data-driven, automated and standardized model generates a ranking of the “EM-25” economies based on a composite of factors reflecting: 1/ The most recent GDP growth data (in relation to three look-back periods), 2/ Forward-looking consensus growth forecasts (in relation to the most recent four quarters of GDP) and 3/ Upgrades and downgrades to those forecasts.
• Andean condors soar while Asian elephants amble along: LatAm – specifically the Andean economies (plus Brazil) – currently stand out as having the most attractive growth profiles among the EM-25. They are helped by a combination of – largely idiosyncratic – factors ranging from newfound reform optimism (Brazil), improving domestic confidence (Colombia), pent-up domestic demand (Peru) and stabilizing appetite for key commodities (Chile). This contrasts with export-oriented Asian manufacturers that dominate the bottom rankings. Elsewhere, the legacy of past macroeconomic policy choices – both painfully orthodox (Argentina) and otherwise (Turkey, Venezuela, Pakistan) – are taking their unique toll on certain other economies.
• Does growth matter for investment strategy? Yes…: Simplistically speaking, economies with exemplary growth profiles are viable candidates for long or overweight positions in equity markets and external debt. Strong growth is often associated with stronger corporate earnings potential as well as lower debt-to-GDP levels, respectively. Growth implications for FX and local debt are more ambiguous, but to the extent that a robust growth outlook guides central banks to tighten policy or lifts the government’s fiscal revenues over time, then this may also be positive for currencies and rates, respectively.

• …But it’s complicated: However, strong growth can detract asset performance if it is the result of unsustainable policies (e.g. overly loose fiscal or monetary actions) or if it leads to overheating conditions (e.g. runaway inflation or a wider current account deficit). An attractive growth profile, as with all data sets, needs to be judged against its context. Although high and improving growth is an end-goal for many policymakers, the road to strong – and sustainable – growth is far more important for its longevity (and for risk assets over the medium-term). For instance: Are growth prospects improving due to rising productivity (as it might from structural reform)? Or rather from overly-stimulative policies that risk fanning inflation or widening the current account deficit? To what extent do officials have the policy flexibility to stoke growth, smoothen downside growth risks or stave off a recession? We touch upon these questions in the individual country sections below.

• While the narrative is almost always more important than the number itself, this GPF framework nevertheless offers a valuable screening tool that systematically evaluates growth profiles – on a stand-alone and relative basis – across the “EM-25” universe.

In this briefing:

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal
2. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town
3. Global EM Special: Andean Condors Vs Asian Elephants – Where Is the Growth in EM?
4. Political Pit Stop (March): Time of Controversy

1. Monthly Geopolitical Comment: Waiting for Trump and Xi to Clinch a Deal

2. Surya Citra Media (SCMA IJ) – Digital Revolution in the Spring – On the Ground in J-Town

A meeting Surya Citra Media Pt Tbk (SCMA IJ) in Jakarta found management in a relatively ebullient mood. The share price performance has been slightly perplexing the fact that its digital strategy is close to coming to fruition, with upcoming acquisitions representing a positive catalyst.

The company will move forward on acquiring controlling stakes in digital streaming player www.vidio.com, internet company www.kapanlagi.com, and out of home media advertising player EYE Indonesia.

Total revenues from the digital and non-TV space will grow from less than 5% of SCMA’s total revenue to nearly 20% of the total, making it the biggest player in both free-to-air and a major player in digital adverting in Indonesia.

Vidio.com is especially interesting given how fragmented that market is currently. Iy=t already has 22m active users viewing its sport and local content but is looking to bring in a major global player to help finance original content and bring in more international content. 

Internet companies represent the biggest and fastest growing advertising customers outside FMCG. They are increasingly paying above market rates for up to two-hour exclusive slots on prime time, where they air their own programming which allows them to engage with the audience. 

The recent Kraft Heinz Co (KHC US) debacle may signal the end of zero-based budgeting, which may mean global players such as Unilever Indonesia (UNVR IJ) start to spend more on advertising. in the meantime, local FMCG players remain more aggressive on advertising their products on TV. 

Surya Citra Media Pt Tbk (SCMA IJ) remains the best quality proxy to the advertising market in Indonesia. The upcoming acquisitions in the digital space represent strong potential catalysts for the stock, which have not yet been factored into valuations. Its core business continues to register stable and rising growth, especially from local FMCG players, with the re-entry of the tobacco companies potentially representing another boon for this year, given there has been no excise tax increase. According to Capital IQ consensus, the company is trading on 15.3x FY19E PER and 13.8x FY20E PER, with forecasts EPS growth of +8.5% and +10.5% for FY19E and FY20E respectively.  The company is forecast to achieve an ROE of 33% in 2019, with a dividend yield of 4.2%. 

3. Global EM Special: Andean Condors Vs Asian Elephants – Where Is the Growth in EM?

Global growth is expected to slow over the coming quarters, possibly years – and emerging market economies are certainly not immune from this. Nevertheless, within this diverse universe, the pace of deceleration will be uneven. Whilst some “open” EM economies are generally synchronized with growth dynamics in the rest of the world, others will be shielded by a combination of idiosyncratic forces – including renewed accommodative (monetary and fiscal) policies, cyclical recovery or upswing in domestic growth drivers and – for some – positive political developments and reform progress. Still, other EMs are less fortunate and a growth deceleration is likely to deepen in the near-term – held back by less policy flexibility, political uncertainty and various domestic or external shocks.

With 4Q18 GDP growth reports underway, we sifted through – and synthesized – various growth indicators to introduce a “Growth-Profile Framework” (GPF) to systematically evaluate – and rank – growth profiles in a data-driven, automated and standardized manner. The “GPF” not only takes into account GDP for the most recently-reported four quarters but also forward-looking forecasts and the latest economist revisions, which often take into account the latest data surprises and other material developments.

The observation universe is the “Emerging Markets-25” (EM-25) of large, investable EM countries most often found in benchmark indices such as MSCI EM and JPMorgan (GBI-EM and EMBI) indices. This opportunity set offers a breadth of diversity spanning across Asia, EMEA and LatAm and different stages of development. 

Highlights: 

• Introducing the “EM-25” Growth Profile Framework: This data-driven, automated and standardized model generates a ranking of the “EM-25” economies based on a composite of factors reflecting: 1/ The most recent GDP growth data (in relation to three look-back periods), 2/ Forward-looking consensus growth forecasts (in relation to the most recent four quarters of GDP) and 3/ Upgrades and downgrades to those forecasts.
• Andean condors soar while Asian elephants amble along: LatAm – specifically the Andean economies (plus Brazil) – currently stand out as having the most attractive growth profiles among the EM-25. They are helped by a combination of – largely idiosyncratic – factors ranging from newfound reform optimism (Brazil), improving domestic confidence (Colombia), pent-up domestic demand (Peru) and stabilizing appetite for key commodities (Chile). This contrasts with export-oriented Asian manufacturers that dominate the bottom rankings. Elsewhere, the legacy of past macroeconomic policy choices – both painfully orthodox (Argentina) and otherwise (Turkey, Venezuela, Pakistan) – are taking their unique toll on certain other economies.
• Does growth matter for investment strategy? Yes…: Simplistically speaking, economies with exemplary growth profiles are viable candidates for long or overweight positions in equity markets and external debt. Strong growth is often associated with stronger corporate earnings potential as well as lower debt-to-GDP levels, respectively. Growth implications for FX and local debt are more ambiguous, but to the extent that a robust growth outlook guides central banks to tighten policy or lifts the government’s fiscal revenues over time, then this may also be positive for currencies and rates, respectively.

• …But it’s complicated: However, strong growth can detract asset performance if it is the result of unsustainable policies (e.g. overly loose fiscal or monetary actions) or if it leads to overheating conditions (e.g. runaway inflation or a wider current account deficit). An attractive growth profile, as with all data sets, needs to be judged against its context. Although high and improving growth is an end-goal for many policymakers, the road to strong – and sustainable – growth is far more important for its longevity (and for risk assets over the medium-term). For instance: Are growth prospects improving due to rising productivity (as it might from structural reform)? Or rather from overly-stimulative policies that risk fanning inflation or widening the current account deficit? To what extent do officials have the policy flexibility to stoke growth, smoothen downside growth risks or stave off a recession? We touch upon these questions in the individual country sections below.

• While the narrative is almost always more important than the number itself, this GPF framework nevertheless offers a valuable screening tool that systematically evaluates growth profiles – on a stand-alone and relative basis – across the “EM-25” universe.

4. Political Pit Stop (March): Time of Controversy

In the recent weeks, the election race heated up, and that’s not surprising when the elections are happening on the 24th. Even by Thai standards, some of these developments were considered quite landmark. Here’s three of the top ones:

• The Thai Raksa Chart Incident. After nominating the King’s eldest sister as Prime Minister, the smaller Thaksinite party faces prospect of dissolution and public backlash.
• National Debate. In a rare Thai Rath event lasting more than an hour, seven political parties, including all the four main ones, get to voice their key policies and even a chance at shooting down each other’s campaign promises. MCorp Review provides some highlights on the debate.
• Army budget. The Thaksinites recently declared that they would cut the defense budget by 10% if elected, touching on one of the most sensitive issues for the Army faction. This is arguably the hottest issue on the media right now.