Thailand

In this briefing:

1. PLAT: Already Priced in the Delay in Opening a New Project
2. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)
3. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
4. MAJOR: Impressive 4Q18 Earnings

1. PLAT: Already Priced in the Delay in Opening a New Project

PLAT reported 4Q18 net profit of Bt198m (-3%YoY, +6%QoQ) and in-line with our expectation.

• Slow sales growth (+3%YoY) due to the delay in opening The Market Bangkok project from Dec 18 to 14 Feb 2019 caused a YoY drop in 4Q18 performance. In summary, 2018 earnings grew 2%YoY driven by 5%YoY in sales growth. We also believe current share price already priced in this delay.
• Despite a drop in 4Q18 earnings YoY, we expect strong recovery in 1H19 earnings driven by opening The Market Bangkok (70% booked).
• We maintain our positive view toward its outlook back by the rise in average rental rate trend after long term contracts expiration in 2020-2021E.
• Announced an annual dividend payment of Bt0.2 (XD on 4 Mar), which is equivalent to 2.6% upcoming dividend yield.

We maintain BUY rating with a target price of Bt9.4 based on DCF (10.8%WACC, 0% TG)*.

2. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)

• China implements coal import caps specifically targeting Australian producers
• Unclear as to how widespread these restrictions will eventually be
• Thermal and metallurgical coal exports affected
• Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income
• Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income
• Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP 
• Actions appear to be a response to blocking Huawei bidding for the 5G network
• Recent Chinese cyber-attacks harden Australian Government’s resolve
• Expect similar Chinese measures (in time) to be applied to other commodities and industries

3. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

4. MAJOR: Impressive 4Q18 Earnings

MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).

• 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
• Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
• SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.

We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.

In this briefing:

1. Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
2. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
3. Snippets #21: Bremain, TMB Rights Issue
4. Tisco – A Bright Bank in a Dim Rate World
5. Thailand’s Election – Growth Story Plays Wait and See

1. Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump

• The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
• The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
• Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
• US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
• Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
• Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
• Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
• Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.

2. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call

• US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
• Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
• Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
• Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.

3. Snippets #21: Bremain, TMB Rights Issue

These are the five developments/news flows/trends and their potential impact on Thai equities you should be aware of in recent weeks: 

• Reversing Brexit. A special report highlighting the possible reversal of Brexit should have limited impact on Thai equities, though a few names like SSI, Thai Union, and Minor do float up on the screen.
• TMB announces a 5 for 1 rights issue at Bt2.07/sh, which could raise US$570m of new capital for their acquisition of Thanchart and imply a 65-35 split of ownership between the two banks.
• Politically motivated wage hike. Some of the political campaigns by smaller parties are even more populist than the major parties, implying wage increases between 10-30% from current levels. This could really destabilize Thailand’s long-term prospects as an investment base. 
• Italian-Thai Chairman thrown into prison. Premchai Karnasutra, who killed one of Thailand’s last 9 black leopards, is sentenced to 16 months in jail. Share prices actually rose!
• Bangkok’s third airport! The Navy is putting up the UTaPao airport construction up for bid. Front runners include the CP-led consortium, which includes ITD, but contenders include the BTS-STEC consortium and another smaller one.

4. Tisco – A Bright Bank in a Dim Rate World

The Fed’s comments may be a surprise to many, but we hope not to our readers. Granular US bank data has indicated for some time, that rising rates were more driven by policy than by demand.  As the world now braces for rate cuts and slower growth, there remain a handful of small banks in Asia Pacific that offer respite. Thailand’s Tisco Financial Group (TISCO TB) ranks as having one of the highest dividend yields in Asia Pacific at 7.8%. Where Tisco remains small, growth prospects are far better than for mainstream banks Bangkok Bank Public (BBL TB), Siam Commercial Bank Pub Co (SCB TB) and Kasikornbank PCL (KBANK TB). Additionally, Tisco has seen a steady rise in profitability with ROA now at 2.31% from 1.84% two years ago and from 1.30% in 2014. This profile of rising and high returns, while still small in a local context, and with one of the best dividend yields anywhere, make it a bright spot in a low rate world.

5. Thailand’s Election – Growth Story Plays Wait and See

With the elections this week, the Bank of Thailand (BoT) held rates steady at its March MPC meeting. We are eagerly awaiting the outcome of the election. We won’t place any bets on which party(ies)/coalition(s) will form the new government, but once the political fog clears, the growth story is positioned to continue.

In this briefing:

1. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)
2. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
3. MAJOR: Impressive 4Q18 Earnings

1. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)

• China implements coal import caps specifically targeting Australian producers
• Unclear as to how widespread these restrictions will eventually be
• Thermal and metallurgical coal exports affected
• Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income
• Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income
• Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP 
• Actions appear to be a response to blocking Huawei bidding for the 5G network
• Recent Chinese cyber-attacks harden Australian Government’s resolve
• Expect similar Chinese measures (in time) to be applied to other commodities and industries

2. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

3. MAJOR: Impressive 4Q18 Earnings

MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).

• 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
• Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
• SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.

We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.

In this briefing:

1. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
2. Snippets #21: Bremain, TMB Rights Issue
3. Tisco – A Bright Bank in a Dim Rate World
4. Thailand’s Election – Growth Story Plays Wait and See
5. Asian Credit Monitor: The Pad Thai Election

1. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call

• US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
• Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
• Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
• Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.

2. Snippets #21: Bremain, TMB Rights Issue

These are the five developments/news flows/trends and their potential impact on Thai equities you should be aware of in recent weeks: 

• Reversing Brexit. A special report highlighting the possible reversal of Brexit should have limited impact on Thai equities, though a few names like SSI, Thai Union, and Minor do float up on the screen.
• TMB announces a 5 for 1 rights issue at Bt2.07/sh, which could raise US$570m of new capital for their acquisition of Thanchart and imply a 65-35 split of ownership between the two banks.
• Politically motivated wage hike. Some of the political campaigns by smaller parties are even more populist than the major parties, implying wage increases between 10-30% from current levels. This could really destabilize Thailand’s long-term prospects as an investment base. 
• Italian-Thai Chairman thrown into prison. Premchai Karnasutra, who killed one of Thailand’s last 9 black leopards, is sentenced to 16 months in jail. Share prices actually rose!
• Bangkok’s third airport! The Navy is putting up the UTaPao airport construction up for bid. Front runners include the CP-led consortium, which includes ITD, but contenders include the BTS-STEC consortium and another smaller one.

3. Tisco – A Bright Bank in a Dim Rate World

The Fed’s comments may be a surprise to many, but we hope not to our readers. Granular US bank data has indicated for some time, that rising rates were more driven by policy than by demand.  As the world now braces for rate cuts and slower growth, there remain a handful of small banks in Asia Pacific that offer respite. Thailand’s Tisco Financial Group (TISCO TB) ranks as having one of the highest dividend yields in Asia Pacific at 7.8%. Where Tisco remains small, growth prospects are far better than for mainstream banks Bangkok Bank Public (BBL TB), Siam Commercial Bank Pub Co (SCB TB) and Kasikornbank PCL (KBANK TB). Additionally, Tisco has seen a steady rise in profitability with ROA now at 2.31% from 1.84% two years ago and from 1.30% in 2014. This profile of rising and high returns, while still small in a local context, and with one of the best dividend yields anywhere, make it a bright spot in a low rate world.

4. Thailand’s Election – Growth Story Plays Wait and See

With the elections this week, the Bank of Thailand (BoT) held rates steady at its March MPC meeting. We are eagerly awaiting the outcome of the election. We won’t place any bets on which party(ies)/coalition(s) will form the new government, but once the political fog clears, the growth story is positioned to continue.

5. Asian Credit Monitor: The Pad Thai Election

We expect the upcoming March 24^th general election in Thailand to be the first step toward a check-and-balance system but also see this election leading to another election in 2-3 years with the current poll pointing to either an indecisive faction with the junta’s leader, General Prayut Chan O-Sha as the Prime Minister (PM) or  a loose faction with Abhisit Vejjajiva as the PM. In either case, we do not expect the new government to have the decisive vote in the parliament. 

With all the campaign promises, most of which copied Thaksin’s populism style, we also expect rising domestic spending post-election. We expect the voting turnout to be a record 80% or above and believe this election is at least a step toward a more transparent government with a valid opposition and that should induce more investments into the country. That said, we see the event as credit positive for Thailand. Though Thailand’s USD and THB bonds are not attractive and/or sufficiently liquid to international investors, in our view, we believe Thailand is worth monitoring on its role to be the center of the Greater Mekong region, let alone ASEAN.

In this briefing:

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
2. MAJOR: Impressive 4Q18 Earnings

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

2. MAJOR: Impressive 4Q18 Earnings

MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).

• 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
• Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
• SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.

We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.

In this briefing:

1. Snippets #21: Bremain, TMB Rights Issue
2. Tisco – A Bright Bank in a Dim Rate World
3. Thailand’s Election – Growth Story Plays Wait and See
4. Asian Credit Monitor: The Pad Thai Election
5. SPCG: Laying Foundations for Next Stage of Growth

1. Snippets #21: Bremain, TMB Rights Issue

These are the five developments/news flows/trends and their potential impact on Thai equities you should be aware of in recent weeks: 

• Reversing Brexit. A special report highlighting the possible reversal of Brexit should have limited impact on Thai equities, though a few names like SSI, Thai Union, and Minor do float up on the screen.
• TMB announces a 5 for 1 rights issue at Bt2.07/sh, which could raise US$570m of new capital for their acquisition of Thanchart and imply a 65-35 split of ownership between the two banks.
• Politically motivated wage hike. Some of the political campaigns by smaller parties are even more populist than the major parties, implying wage increases between 10-30% from current levels. This could really destabilize Thailand’s long-term prospects as an investment base. 
• Italian-Thai Chairman thrown into prison. Premchai Karnasutra, who killed one of Thailand’s last 9 black leopards, is sentenced to 16 months in jail. Share prices actually rose!
• Bangkok’s third airport! The Navy is putting up the UTaPao airport construction up for bid. Front runners include the CP-led consortium, which includes ITD, but contenders include the BTS-STEC consortium and another smaller one.

2. Tisco – A Bright Bank in a Dim Rate World

The Fed’s comments may be a surprise to many, but we hope not to our readers. Granular US bank data has indicated for some time, that rising rates were more driven by policy than by demand.  As the world now braces for rate cuts and slower growth, there remain a handful of small banks in Asia Pacific that offer respite. Thailand’s Tisco Financial Group (TISCO TB) ranks as having one of the highest dividend yields in Asia Pacific at 7.8%. Where Tisco remains small, growth prospects are far better than for mainstream banks Bangkok Bank Public (BBL TB), Siam Commercial Bank Pub Co (SCB TB) and Kasikornbank PCL (KBANK TB). Additionally, Tisco has seen a steady rise in profitability with ROA now at 2.31% from 1.84% two years ago and from 1.30% in 2014. This profile of rising and high returns, while still small in a local context, and with one of the best dividend yields anywhere, make it a bright spot in a low rate world.

3. Thailand’s Election – Growth Story Plays Wait and See

With the elections this week, the Bank of Thailand (BoT) held rates steady at its March MPC meeting. We are eagerly awaiting the outcome of the election. We won’t place any bets on which party(ies)/coalition(s) will form the new government, but once the political fog clears, the growth story is positioned to continue.

4. Asian Credit Monitor: The Pad Thai Election

We expect the upcoming March 24^th general election in Thailand to be the first step toward a check-and-balance system but also see this election leading to another election in 2-3 years with the current poll pointing to either an indecisive faction with the junta’s leader, General Prayut Chan O-Sha as the Prime Minister (PM) or  a loose faction with Abhisit Vejjajiva as the PM. In either case, we do not expect the new government to have the decisive vote in the parliament. 

With all the campaign promises, most of which copied Thaksin’s populism style, we also expect rising domestic spending post-election. We expect the voting turnout to be a record 80% or above and believe this election is at least a step toward a more transparent government with a valid opposition and that should induce more investments into the country. That said, we see the event as credit positive for Thailand. Though Thailand’s USD and THB bonds are not attractive and/or sufficiently liquid to international investors, in our view, we believe Thailand is worth monitoring on its role to be the center of the Greater Mekong region, let alone ASEAN.

5. SPCG: Laying Foundations for Next Stage of Growth

We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.

The story:

• Promising industry outlook
• Striding toward overseas opportunities
• Expiring adder should have been priced in already
• Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

In this briefing:

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
2. MAJOR: Impressive 4Q18 Earnings
3. Delta Thailand’s Tender Offer: Updated Timetable

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

2. MAJOR: Impressive 4Q18 Earnings

MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).

• 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
• Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
• SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.

We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.

3. Delta Thailand’s Tender Offer: Updated Timetable

With Form 247-3 (Intention to Make a Tender Offer) and the FY18 dividend  (Bt2.30/share) for Delta Electronics Thai (DELTA TB) having been announced, this insight briefly provides an updated indicative timetable for investors.

The next key date is the submission of Form 247-4, the Tender Offer for Securities, which will provide full details of the Offer.

This above indicative timetable assumes a conditional offer based on a minimum acceptance level of at least 50%. Payment under the offer may indeed be earlier, as explained below, which also ties in with a shareholders’ right to revoke shares tendered. 

In addition, investors should not tender once the offer opens – assuming the tender period commences on the 25 February – but wait until their shares are on the registry as at 4 March to receive the FY18 dividend.

Currently trading at a 2.2%/22% gross/annualised spread. Bear in mind the dividend is subject to 10% tax.

In this briefing:

1. MAJOR: Impressive 4Q18 Earnings
2. Delta Thailand’s Tender Offer: Updated Timetable

1. MAJOR: Impressive 4Q18 Earnings

MAJOR 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). The impressive earnings was driven by solid guests admission (+97%YoY).

• 4Q18 revenue was Bt3.0bn (+59%YoY, +44% QoQ). Interesting movies lineup was the factor, pushing admission revenue (+88%YoY) and concession revenue (+70%YoY).
• Gross profit margin was strong at 37.6% from 28.7% in 4Q17 and 30.8% in 3Q18, thank to the higher contribution of concession revenue, which has decent margin.
• SG&A to sales was under control at 27.0%, compared to 34.3% in 4Q17 and 26.7% in 3Q18.

We maintain a BUY rating on MAJOR with 2019E target price of Bt31.00, derived from a PER of 24.2x, which is +1 SD of its 3-year trading average. We expect MAJOR to continuously deliver robust earnings in 2019E, given the fascinating movies lineup and advertising sales model changing from direct selling to selling through agencies.

2. Delta Thailand’s Tender Offer: Updated Timetable

With Form 247-3 (Intention to Make a Tender Offer) and the FY18 dividend  (Bt2.30/share) for Delta Electronics Thai (DELTA TB) having been announced, this insight briefly provides an updated indicative timetable for investors.

The next key date is the submission of Form 247-4, the Tender Offer for Securities, which will provide full details of the Offer.

This above indicative timetable assumes a conditional offer based on a minimum acceptance level of at least 50%. Payment under the offer may indeed be earlier, as explained below, which also ties in with a shareholders’ right to revoke shares tendered. 

In addition, investors should not tender once the offer opens – assuming the tender period commences on the 25 February – but wait until their shares are on the registry as at 4 March to receive the FY18 dividend.

Currently trading at a 2.2%/22% gross/annualised spread. Bear in mind the dividend is subject to 10% tax.

In this briefing:

1. Tisco – A Bright Bank in a Dim Rate World
2. Thailand’s Election – Growth Story Plays Wait and See
3. Asian Credit Monitor: The Pad Thai Election
4. SPCG: Laying Foundations for Next Stage of Growth
5. S: Outshines Thai Property Peers on High Recurring Profit

1. Tisco – A Bright Bank in a Dim Rate World

The Fed’s comments may be a surprise to many, but we hope not to our readers. Granular US bank data has indicated for some time, that rising rates were more driven by policy than by demand.  As the world now braces for rate cuts and slower growth, there remain a handful of small banks in Asia Pacific that offer respite. Thailand’s Tisco Financial Group (TISCO TB) ranks as having one of the highest dividend yields in Asia Pacific at 7.8%. Where Tisco remains small, growth prospects are far better than for mainstream banks Bangkok Bank Public (BBL TB), Siam Commercial Bank Pub Co (SCB TB) and Kasikornbank PCL (KBANK TB). Additionally, Tisco has seen a steady rise in profitability with ROA now at 2.31% from 1.84% two years ago and from 1.30% in 2014. This profile of rising and high returns, while still small in a local context, and with one of the best dividend yields anywhere, make it a bright spot in a low rate world.

2. Thailand’s Election – Growth Story Plays Wait and See

With the elections this week, the Bank of Thailand (BoT) held rates steady at its March MPC meeting. We are eagerly awaiting the outcome of the election. We won’t place any bets on which party(ies)/coalition(s) will form the new government, but once the political fog clears, the growth story is positioned to continue.

3. Asian Credit Monitor: The Pad Thai Election

We expect the upcoming March 24^th general election in Thailand to be the first step toward a check-and-balance system but also see this election leading to another election in 2-3 years with the current poll pointing to either an indecisive faction with the junta’s leader, General Prayut Chan O-Sha as the Prime Minister (PM) or  a loose faction with Abhisit Vejjajiva as the PM. In either case, we do not expect the new government to have the decisive vote in the parliament. 

With all the campaign promises, most of which copied Thaksin’s populism style, we also expect rising domestic spending post-election. We expect the voting turnout to be a record 80% or above and believe this election is at least a step toward a more transparent government with a valid opposition and that should induce more investments into the country. That said, we see the event as credit positive for Thailand. Though Thailand’s USD and THB bonds are not attractive and/or sufficiently liquid to international investors, in our view, we believe Thailand is worth monitoring on its role to be the center of the Greater Mekong region, let alone ASEAN.

4. SPCG: Laying Foundations for Next Stage of Growth

We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.

The story:

• Promising industry outlook
• Striding toward overseas opportunities
• Expiring adder should have been priced in already
• Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

5. S: Outshines Thai Property Peers on High Recurring Profit

We initiate coverage of S with a BUY rating, based on a target price of Bt4.2 derived from a sum-of-the-parts (SOTP) methodology and implying 16.5xPE’19E, a 23% discount to the average of its peers in the Thai real estate sector.

The story:

• Asset value to drive long-term sustainable growth
• 19 projects under development worth a combined Bt36bn to drive sales over the next three years
• REITs will be a key catalyst to boost recurring income
• Higher revenue contribution from hotel business

Risks:

• Tightened credit approval
• Raw material costs & F/X fluctuation

Background: In 2014, Santi Bhirombhakdi** and his property arm, Singha Property Management, acquired a major stake in RASA, a listed property company on the SET, and changed its name to “Singha Estate Public Company Limited”,  or “S”. This new major shareholder quickly unveiled plans to transform S into a holding company. During 2015-17, the company made several acquisitions including (1) a 51.56% stake in NVD, a low-rise property developer that operates under the “Nirvana” brand with a current market value of Bt2.7bn; (2) Suntowers, an office complex worth Bt4.5bn; and (3) a mixed-use commercial complex owned by the major holder’s family business worth over Bt6bn. It also set up a joint venture with a partner to invest in and operate 26 hotels in the UK worth Bt8.6bn.

Revenue breakdown:

The residential property segment contributed 41% of S’s 2018 total revenue. This segment includes the development and sale of high-rise and-low rise projects such as single detached houses, townhomes, home offices, and condominiums.

The commercial property segment contributed 36% of total revenue. This business includes space for rent, common-service charges for utilities, security systems, and other service fees. The company owns two commercial property projects — The Lighthouse (a community mall) and Suntowers (an office complex).

S owns 37 hotels with a combined 4,271 rooms comprising (1) two hotels with 297 rooms in Thailand, namely Santiburi Beach Resort & Spa and Phi Phi Island Village Beach Resort; (2) 22 hotels in England and 7 in Scotland (total of 3,115 rooms) under a 50:50 JV with FICO Group; and (3) 6 Outrigger-branded hotels with 859 rooms. This segment accounts for 18% of sales.

The company also provides construction materials such as precast concrete and aluminum, as well as hotel management services. These two segments contribute 3% and 2% respectively.

In this briefing:

1. Delta Thailand’s Tender Offer: Updated Timetable

1. Delta Thailand’s Tender Offer: Updated Timetable

With Form 247-3 (Intention to Make a Tender Offer) and the FY18 dividend  (Bt2.30/share) for Delta Electronics Thai (DELTA TB) having been announced, this insight briefly provides an updated indicative timetable for investors.

The next key date is the submission of Form 247-4, the Tender Offer for Securities, which will provide full details of the Offer.

This above indicative timetable assumes a conditional offer based on a minimum acceptance level of at least 50%. Payment under the offer may indeed be earlier, as explained below, which also ties in with a shareholders’ right to revoke shares tendered. 

In addition, investors should not tender once the offer opens – assuming the tender period commences on the 25 February – but wait until their shares are on the registry as at 4 March to receive the FY18 dividend.

Currently trading at a 2.2%/22% gross/annualised spread. Bear in mind the dividend is subject to 10% tax.