Thailand

In this briefing:

1. Memory Chips and the Elasticity Myth
2. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
3. IPO Stalker: SISB’s Growth Plans
4. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
5. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019

1. Memory Chips and the Elasticity Myth

During recent earnings calls memory chip makers have postulated that the market will return to higher margins once price elasticity causes demand to increase.  This popular myth needs to be treated with great skepticism since, as this Insight will reveal, short-term price elasticity has a negligible impact upon memory chip sales if it has any impact at all.

2. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.

The story:

• Secured revenue from domestic trading business
• IMO 2020 implementation to propel floating storage demand
• Recovery in T/C rate should prompt international trading turnaround

Risks:  Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations

3. IPO Stalker: SISB’s Growth Plans

SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:

• positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
• expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
• Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
• favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.

4. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand

• Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
• Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
• South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.

5. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019

SYNEX’s 4Q18 net profit was at Bt190m (+16%YoY, +18QoQ), in-line with our expectation

• Record-high level of sales at Bt10.38bn is the major contributor to impressive 4Q18 performance. Meanwhile , gross margin drops below 4% in the first time due to changing product mix towards more on device segment
• SYNEX post 2018 net profit of Bt721m (+15%YoY) driven by 18% increase in revenue
• We maintain our positive view toward FY19-20E earnings outlook driven by (1) number of flagship smartphone model launches and new brands for low budget users, Neffos, and, (2) higher sales contribution from high-margins product such as gaming desktops and post-sales services.

We maintain our BUY rating with a new target price of Bt16.80 (previous target price at Bt15.0) derived from 17xPE’2019E, which is the average of the World information and technology sector

In this briefing:

1. Global EM Special: Andean Condors Vs Asian Elephants – Where Is the Growth in EM?
2. Political Pit Stop (March): Time of Controversy
3. SGP: Ready for New Growth Cycle
4. M&A: A Round-Up of Deals in February 2019
5. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

1. 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.

2. 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.

3. SGP: Ready for New Growth Cycle

We initiate coverage of SGP with a BUY rating and a 2019E target price of Bt14.00, derived from 10.9x PE’19E, which is +0.5 SD of its 3-year trading average. We believe that a new growth cycle is poised to act as a re-rating catalyst.

The story:

• Regional LPG player with upstream transportation network
• New businesses to drive new growth cycle
• LPG price set to bottom out
• Expected earnings to recover in 2019E

Risks: 

             Currency  fluctuation

             Raw material price fluctuation

             Overseas investment failure

4. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

Brief Summary of News in February of Arb Situations On Our Radar

5. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

In this briefing:

1. Political Pit Stop (March): Time of Controversy
2. SGP: Ready for New Growth Cycle
3. M&A: A Round-Up of Deals in February 2019
4. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
5. Memory Chips and the Elasticity Myth

1. 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.

2. SGP: Ready for New Growth Cycle

We initiate coverage of SGP with a BUY rating and a 2019E target price of Bt14.00, derived from 10.9x PE’19E, which is +0.5 SD of its 3-year trading average. We believe that a new growth cycle is poised to act as a re-rating catalyst.

The story:

• Regional LPG player with upstream transportation network
• New businesses to drive new growth cycle
• LPG price set to bottom out
• Expected earnings to recover in 2019E

Risks: 

             Currency  fluctuation

             Raw material price fluctuation

             Overseas investment failure

3. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

Brief Summary of News in February of Arb Situations On Our Radar

4. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

5. Memory Chips and the Elasticity Myth

During recent earnings calls memory chip makers have postulated that the market will return to higher margins once price elasticity causes demand to increase.  This popular myth needs to be treated with great skepticism since, as this Insight will reveal, short-term price elasticity has a negligible impact upon memory chip sales if it has any impact at all.

In this briefing:

1. SGP: Ready for New Growth Cycle
2. M&A: A Round-Up of Deals in February 2019
3. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
4. Memory Chips and the Elasticity Myth
5. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

1. SGP: Ready for New Growth Cycle

We initiate coverage of SGP with a BUY rating and a 2019E target price of Bt14.00, derived from 10.9x PE’19E, which is +0.5 SD of its 3-year trading average. We believe that a new growth cycle is poised to act as a re-rating catalyst.

The story:

• Regional LPG player with upstream transportation network
• New businesses to drive new growth cycle
• LPG price set to bottom out
• Expected earnings to recover in 2019E

Risks: 

             Currency  fluctuation

             Raw material price fluctuation

             Overseas investment failure

2. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

Brief Summary of News in February of Arb Situations On Our Radar

3. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

4. Memory Chips and the Elasticity Myth

During recent earnings calls memory chip makers have postulated that the market will return to higher margins once price elasticity causes demand to increase.  This popular myth needs to be treated with great skepticism since, as this Insight will reveal, short-term price elasticity has a negligible impact upon memory chip sales if it has any impact at all.

5. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.

The story:

• Secured revenue from domestic trading business
• IMO 2020 implementation to propel floating storage demand
• Recovery in T/C rate should prompt international trading turnaround

Risks:  Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations

In this briefing:

1. M&A: A Round-Up of Deals in February 2019
2. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
3. Memory Chips and the Elasticity Myth
4. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
5. IPO Stalker: SISB’s Growth Plans

1. M&A: A Round-Up of Deals in February 2019

For the month of February, thirteen new deals were discussed on Smartkarma with an overall deal size of US$12.3bn.

This overall number includes the “offer” for Hanergy Thin Film Power (566 HK) which has no value, as yet, attached to the scrip component.

A firm number for Glow Energy Pcl (GLOW TB) has yet to be announced, which could result in a US$4bn+ deal.

The average premium to last close for the new deals was 27.5%.

Brief Summary of News in February of Arb Situations On Our Radar

2. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

3. Memory Chips and the Elasticity Myth

During recent earnings calls memory chip makers have postulated that the market will return to higher margins once price elasticity causes demand to increase.  This popular myth needs to be treated with great skepticism since, as this Insight will reveal, short-term price elasticity has a negligible impact upon memory chip sales if it has any impact at all.

4. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.

The story:

• Secured revenue from domestic trading business
• IMO 2020 implementation to propel floating storage demand
• Recovery in T/C rate should prompt international trading turnaround

Risks:  Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations

5. IPO Stalker: SISB’s Growth Plans

SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:

• positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
• expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
• Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
• favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.

In this briefing:

1. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
2. Memory Chips and the Elasticity Myth
3. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
4. IPO Stalker: SISB’s Growth Plans
5. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand

1. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

2. Memory Chips and the Elasticity Myth

During recent earnings calls memory chip makers have postulated that the market will return to higher margins once price elasticity causes demand to increase.  This popular myth needs to be treated with great skepticism since, as this Insight will reveal, short-term price elasticity has a negligible impact upon memory chip sales if it has any impact at all.

3. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.

The story:

• Secured revenue from domestic trading business
• IMO 2020 implementation to propel floating storage demand
• Recovery in T/C rate should prompt international trading turnaround

Risks:  Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations

4. IPO Stalker: SISB’s Growth Plans

SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:

• positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
• expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
• Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
• favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.

5. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand

• Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
• Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
• South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.

In this briefing:

1. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
2. IPO Stalker: SISB’s Growth Plans
3. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
4. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019
5. Golden Land: Less An Offer, More A Consolidation Of Interests

1. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.

The story:

• Secured revenue from domestic trading business
• IMO 2020 implementation to propel floating storage demand
• Recovery in T/C rate should prompt international trading turnaround

Risks:  Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations

2. IPO Stalker: SISB’s Growth Plans

SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:

• positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
• expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
• Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
• favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.

3. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand

• Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
• Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
• South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.

4. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019

SYNEX’s 4Q18 net profit was at Bt190m (+16%YoY, +18QoQ), in-line with our expectation

• Record-high level of sales at Bt10.38bn is the major contributor to impressive 4Q18 performance. Meanwhile , gross margin drops below 4% in the first time due to changing product mix towards more on device segment
• SYNEX post 2018 net profit of Bt721m (+15%YoY) driven by 18% increase in revenue
• We maintain our positive view toward FY19-20E earnings outlook driven by (1) number of flagship smartphone model launches and new brands for low budget users, Neffos, and, (2) higher sales contribution from high-margins product such as gaming desktops and post-sales services.

We maintain our BUY rating with a new target price of Bt16.80 (previous target price at Bt15.0) derived from 17xPE’2019E, which is the average of the World information and technology sector

5. Golden Land: Less An Offer, More A Consolidation Of Interests

Frasers Property (Thailand) Pcl (FPT TB) has announced a conditional voluntary tender offer for Golden Land Prop Dvlp (GOLD TB) at Bt8.50/share, ~2.4% premium to last close.

Frasers Property Ltd (FPL SP) owns 40.95% in FPT and also 39.92% in GOLD. FPT’s director Panote Sirivadhanabhakdi (the son of Charoen Sirivadhanabhakdi), via his majority-controlled vehicle Univentures Public (UV TB), holds 39.28% in GOLD. Panote is also the vice-chairman of GOLD.

Presumably, both FPL and Univentures will tender into the Offer giving FPT a minimum holding of 80.2%. There were no specific minimum acceptance conditions attached to the tender offer mentioned in the announcement.

Should FPP secure 90% of GOLD in the tender offer, it may proceed with its delisting. A voluntary delisting is still achievable with ~80% in the bag, but that is conditional on <10% of shareholders not voting against.

Preconditions to the commencement of the tender offer include the approval from disinterested shareholders in FPP, approval from “relevant contractual parties of GOLD and GOLD’s subsidiaries” and the approval from the Office of Trade Competition Commission.

The fact the Sirivadhanabhakdi family already holds, directly/indirectly ~80% in GOLD, such regulatory approvals should be forthcoming.

This appears a done deal. The only apparent risk is the expected shareholder vote of Univentures wherein Panote will likely need to abstain.

Currently trading at a gross/annualized spread of 1.8%/4.3% assuming early August payment. Very tight, suggesting investors are more likely angling for the back-end.

In this briefing:

1. IPO Stalker: SISB’s Growth Plans
2. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
3. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019
4. Golden Land: Less An Offer, More A Consolidation Of Interests
5. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy

1. IPO Stalker: SISB’s Growth Plans

SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:

• positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
• expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
• Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
• favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.

2. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand

• Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
• Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
• South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.

3. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019

SYNEX’s 4Q18 net profit was at Bt190m (+16%YoY, +18QoQ), in-line with our expectation

• Record-high level of sales at Bt10.38bn is the major contributor to impressive 4Q18 performance. Meanwhile , gross margin drops below 4% in the first time due to changing product mix towards more on device segment
• SYNEX post 2018 net profit of Bt721m (+15%YoY) driven by 18% increase in revenue
• We maintain our positive view toward FY19-20E earnings outlook driven by (1) number of flagship smartphone model launches and new brands for low budget users, Neffos, and, (2) higher sales contribution from high-margins product such as gaming desktops and post-sales services.

We maintain our BUY rating with a new target price of Bt16.80 (previous target price at Bt15.0) derived from 17xPE’2019E, which is the average of the World information and technology sector

4. Golden Land: Less An Offer, More A Consolidation Of Interests

Frasers Property (Thailand) Pcl (FPT TB) has announced a conditional voluntary tender offer for Golden Land Prop Dvlp (GOLD TB) at Bt8.50/share, ~2.4% premium to last close.

Frasers Property Ltd (FPL SP) owns 40.95% in FPT and also 39.92% in GOLD. FPT’s director Panote Sirivadhanabhakdi (the son of Charoen Sirivadhanabhakdi), via his majority-controlled vehicle Univentures Public (UV TB), holds 39.28% in GOLD. Panote is also the vice-chairman of GOLD.

Presumably, both FPL and Univentures will tender into the Offer giving FPT a minimum holding of 80.2%. There were no specific minimum acceptance conditions attached to the tender offer mentioned in the announcement.

Should FPP secure 90% of GOLD in the tender offer, it may proceed with its delisting. A voluntary delisting is still achievable with ~80% in the bag, but that is conditional on <10% of shareholders not voting against.

Preconditions to the commencement of the tender offer include the approval from disinterested shareholders in FPP, approval from “relevant contractual parties of GOLD and GOLD’s subsidiaries” and the approval from the Office of Trade Competition Commission.

The fact the Sirivadhanabhakdi family already holds, directly/indirectly ~80% in GOLD, such regulatory approvals should be forthcoming.

This appears a done deal. The only apparent risk is the expected shareholder vote of Univentures wherein Panote will likely need to abstain.

Currently trading at a gross/annualized spread of 1.8%/4.3% assuming early August payment. Very tight, suggesting investors are more likely angling for the back-end.

5. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy

Macro Insights

In Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness, CrossASEAN Economist Prasenjit K. Basu zooms in on the Singapore economy and despite expectations of slower growth this year, sees ample room for fiscal stimulus should the global economy weaken further.

In US Dollar Demand – Fading Appetite, Dr. Jim Walker discusses the less than voracious appetite for the US Dollar.

In Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text, Kevin O’Rourke provides his value-added commentary on political and economic developments in Indonesia over the past week. 

In Philippines: Institutional Reforms that Promote Macro Stability, Phipillines economist Jun Trinidad zeros in on institutional reforms which he sees are providing a stable platform for growth. 

Equity Bottom-Up Insights

In XL Axiata Results Show a Strong Turnaround Underway in Indonesia, our friends at New Street Research revisit Xl Axiata (EXCL IJ) post its most recent results and see the potential for a strong data-driven turnaround over the coming few quarters. 

In Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates, New Street Research circle back to Singtel (ST SP) post results and remains constructive on the stock. 

In M1 Offer Unconditional as Axiata Tenders, Events Specialist Travis Lundy revisits the ongoing M1 Ltd (M1 SP) deal which seems to have reached a conclusion following Axiata Group (AXIATA MK) ‘s acceptance. 

In Best World (BEST SP): Not the Best Financials to Disprove The Business Times Allegations, Arun George takes a look at the company following an article in the local press casting dispersions on its China sales. 

In Delta Thailand’s Tender Offer: Updated Timetable, David Blennerhassett circles back to the ongoing tender offer for Delta Electronics Thai (DELTA TB). 

In Sing Holdings – Surge in Full-Year Earnings with a Surprise Hike in Dividend. 67% Upside. BUY., Royston Foo comments on the company following a strong set of results. 

In MAJOR: Impressive 4Q18 Earnings, our friends at Country Group comment on Major Cineplex Group (MAJOR TB) following stellar numbers. MAJOR’s 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). 

Sector and Thematic Insights

In this week’s REIT Discover: The Three R’s Driving Starhill Global REIT (SGREIT SP), Anni Kum zeros in on Starhill Global Reit (SGREIT SP) and finds an interesting story. 

In this briefing:

1. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
2. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019
3. Golden Land: Less An Offer, More A Consolidation Of Interests
4. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy
5. Asia’s External Balances Signal Safety for Investors

1. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand

• Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
• Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
• South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.

2. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019

SYNEX’s 4Q18 net profit was at Bt190m (+16%YoY, +18QoQ), in-line with our expectation

• Record-high level of sales at Bt10.38bn is the major contributor to impressive 4Q18 performance. Meanwhile , gross margin drops below 4% in the first time due to changing product mix towards more on device segment
• SYNEX post 2018 net profit of Bt721m (+15%YoY) driven by 18% increase in revenue
• We maintain our positive view toward FY19-20E earnings outlook driven by (1) number of flagship smartphone model launches and new brands for low budget users, Neffos, and, (2) higher sales contribution from high-margins product such as gaming desktops and post-sales services.

We maintain our BUY rating with a new target price of Bt16.80 (previous target price at Bt15.0) derived from 17xPE’2019E, which is the average of the World information and technology sector

3. Golden Land: Less An Offer, More A Consolidation Of Interests

Frasers Property (Thailand) Pcl (FPT TB) has announced a conditional voluntary tender offer for Golden Land Prop Dvlp (GOLD TB) at Bt8.50/share, ~2.4% premium to last close.

Frasers Property Ltd (FPL SP) owns 40.95% in FPT and also 39.92% in GOLD. FPT’s director Panote Sirivadhanabhakdi (the son of Charoen Sirivadhanabhakdi), via his majority-controlled vehicle Univentures Public (UV TB), holds 39.28% in GOLD. Panote is also the vice-chairman of GOLD.

Presumably, both FPL and Univentures will tender into the Offer giving FPT a minimum holding of 80.2%. There were no specific minimum acceptance conditions attached to the tender offer mentioned in the announcement.

Should FPP secure 90% of GOLD in the tender offer, it may proceed with its delisting. A voluntary delisting is still achievable with ~80% in the bag, but that is conditional on <10% of shareholders not voting against.

Preconditions to the commencement of the tender offer include the approval from disinterested shareholders in FPP, approval from “relevant contractual parties of GOLD and GOLD’s subsidiaries” and the approval from the Office of Trade Competition Commission.

The fact the Sirivadhanabhakdi family already holds, directly/indirectly ~80% in GOLD, such regulatory approvals should be forthcoming.

This appears a done deal. The only apparent risk is the expected shareholder vote of Univentures wherein Panote will likely need to abstain.

Currently trading at a gross/annualized spread of 1.8%/4.3% assuming early August payment. Very tight, suggesting investors are more likely angling for the back-end.

4. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy

Macro Insights

In Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness, CrossASEAN Economist Prasenjit K. Basu zooms in on the Singapore economy and despite expectations of slower growth this year, sees ample room for fiscal stimulus should the global economy weaken further.

In US Dollar Demand – Fading Appetite, Dr. Jim Walker discusses the less than voracious appetite for the US Dollar.

In Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text, Kevin O’Rourke provides his value-added commentary on political and economic developments in Indonesia over the past week. 

In Philippines: Institutional Reforms that Promote Macro Stability, Phipillines economist Jun Trinidad zeros in on institutional reforms which he sees are providing a stable platform for growth. 

Equity Bottom-Up Insights

In XL Axiata Results Show a Strong Turnaround Underway in Indonesia, our friends at New Street Research revisit Xl Axiata (EXCL IJ) post its most recent results and see the potential for a strong data-driven turnaround over the coming few quarters. 

In Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates, New Street Research circle back to Singtel (ST SP) post results and remains constructive on the stock. 

In M1 Offer Unconditional as Axiata Tenders, Events Specialist Travis Lundy revisits the ongoing M1 Ltd (M1 SP) deal which seems to have reached a conclusion following Axiata Group (AXIATA MK) ‘s acceptance. 

In Best World (BEST SP): Not the Best Financials to Disprove The Business Times Allegations, Arun George takes a look at the company following an article in the local press casting dispersions on its China sales. 

In Delta Thailand’s Tender Offer: Updated Timetable, David Blennerhassett circles back to the ongoing tender offer for Delta Electronics Thai (DELTA TB). 

In Sing Holdings – Surge in Full-Year Earnings with a Surprise Hike in Dividend. 67% Upside. BUY., Royston Foo comments on the company following a strong set of results. 

In MAJOR: Impressive 4Q18 Earnings, our friends at Country Group comment on Major Cineplex Group (MAJOR TB) following stellar numbers. MAJOR’s 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). 

Sector and Thematic Insights

In this week’s REIT Discover: The Three R’s Driving Starhill Global REIT (SGREIT SP), Anni Kum zeros in on Starhill Global Reit (SGREIT SP) and finds an interesting story. 

5. Asia’s External Balances Signal Safety for Investors

Asian currencies are, in general, well supported by economic fundamentals in the form of external surpluses and interest rate differentials. Indeed, most Asian currencies display an appreciating bias, contrary to perceptions in 2018 when all of them lost ground to the US dollar. Over the last year the underlying external strength has been reflected in Asian currency appreciation against the US dollar.

In this briefing:

1. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019
2. Golden Land: Less An Offer, More A Consolidation Of Interests
3. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy
4. Asia’s External Balances Signal Safety for Investors
5. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.

1. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019

SYNEX’s 4Q18 net profit was at Bt190m (+16%YoY, +18QoQ), in-line with our expectation

• Record-high level of sales at Bt10.38bn is the major contributor to impressive 4Q18 performance. Meanwhile , gross margin drops below 4% in the first time due to changing product mix towards more on device segment
• SYNEX post 2018 net profit of Bt721m (+15%YoY) driven by 18% increase in revenue
• We maintain our positive view toward FY19-20E earnings outlook driven by (1) number of flagship smartphone model launches and new brands for low budget users, Neffos, and, (2) higher sales contribution from high-margins product such as gaming desktops and post-sales services.

We maintain our BUY rating with a new target price of Bt16.80 (previous target price at Bt15.0) derived from 17xPE’2019E, which is the average of the World information and technology sector

2. Golden Land: Less An Offer, More A Consolidation Of Interests

Frasers Property (Thailand) Pcl (FPT TB) has announced a conditional voluntary tender offer for Golden Land Prop Dvlp (GOLD TB) at Bt8.50/share, ~2.4% premium to last close.

Frasers Property Ltd (FPL SP) owns 40.95% in FPT and also 39.92% in GOLD. FPT’s director Panote Sirivadhanabhakdi (the son of Charoen Sirivadhanabhakdi), via his majority-controlled vehicle Univentures Public (UV TB), holds 39.28% in GOLD. Panote is also the vice-chairman of GOLD.

Presumably, both FPL and Univentures will tender into the Offer giving FPT a minimum holding of 80.2%. There were no specific minimum acceptance conditions attached to the tender offer mentioned in the announcement.

Should FPP secure 90% of GOLD in the tender offer, it may proceed with its delisting. A voluntary delisting is still achievable with ~80% in the bag, but that is conditional on <10% of shareholders not voting against.

Preconditions to the commencement of the tender offer include the approval from disinterested shareholders in FPP, approval from “relevant contractual parties of GOLD and GOLD’s subsidiaries” and the approval from the Office of Trade Competition Commission.

The fact the Sirivadhanabhakdi family already holds, directly/indirectly ~80% in GOLD, such regulatory approvals should be forthcoming.

This appears a done deal. The only apparent risk is the expected shareholder vote of Univentures wherein Panote will likely need to abstain.

Currently trading at a gross/annualized spread of 1.8%/4.3% assuming early August payment. Very tight, suggesting investors are more likely angling for the back-end.

3. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy

Macro Insights

In Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness, CrossASEAN Economist Prasenjit K. Basu zooms in on the Singapore economy and despite expectations of slower growth this year, sees ample room for fiscal stimulus should the global economy weaken further.

In US Dollar Demand – Fading Appetite, Dr. Jim Walker discusses the less than voracious appetite for the US Dollar.

In Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text, Kevin O’Rourke provides his value-added commentary on political and economic developments in Indonesia over the past week. 

In Philippines: Institutional Reforms that Promote Macro Stability, Phipillines economist Jun Trinidad zeros in on institutional reforms which he sees are providing a stable platform for growth. 

Equity Bottom-Up Insights

In XL Axiata Results Show a Strong Turnaround Underway in Indonesia, our friends at New Street Research revisit Xl Axiata (EXCL IJ) post its most recent results and see the potential for a strong data-driven turnaround over the coming few quarters. 

In Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates, New Street Research circle back to Singtel (ST SP) post results and remains constructive on the stock. 

In M1 Offer Unconditional as Axiata Tenders, Events Specialist Travis Lundy revisits the ongoing M1 Ltd (M1 SP) deal which seems to have reached a conclusion following Axiata Group (AXIATA MK) ‘s acceptance. 

In Best World (BEST SP): Not the Best Financials to Disprove The Business Times Allegations, Arun George takes a look at the company following an article in the local press casting dispersions on its China sales. 

In Delta Thailand’s Tender Offer: Updated Timetable, David Blennerhassett circles back to the ongoing tender offer for Delta Electronics Thai (DELTA TB). 

In Sing Holdings – Surge in Full-Year Earnings with a Surprise Hike in Dividend. 67% Upside. BUY., Royston Foo comments on the company following a strong set of results. 

In MAJOR: Impressive 4Q18 Earnings, our friends at Country Group comment on Major Cineplex Group (MAJOR TB) following stellar numbers. MAJOR’s 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ). 

Sector and Thematic Insights

In this week’s REIT Discover: The Three R’s Driving Starhill Global REIT (SGREIT SP), Anni Kum zeros in on Starhill Global Reit (SGREIT SP) and finds an interesting story. 

4. Asia’s External Balances Signal Safety for Investors

Asian currencies are, in general, well supported by economic fundamentals in the form of external surpluses and interest rate differentials. Indeed, most Asian currencies display an appreciating bias, contrary to perceptions in 2018 when all of them lost ground to the US dollar. Over the last year the underlying external strength has been reflected in Asian currency appreciation against the US dollar.

5. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.

According to SEMI, North American (NA) WFE sales for January 2019 fell to $1.9 billion, down ~10% sequentially and ~20% YoY. This was an abrupt reversal of the recovery trend implied by the December 2018 sales of $2.1 billion and is the biggest monthly sales YoY decline since June 2013.

Just as declining monthly WFE sales preceded the current semiconductor downturn by some six months, the continuation of December’s MoM WFE decline reversal trend was a prerequisite for a second half recovery in the broader semiconductor sector. With that trend well and truly broken,  we now anticipate a more delayed, gradual and prolonged recovery, one which is now unlikely to materialise until late third, early fourth quarter 2019.