Brief Thailand: Follow The Money and more

In this briefing:

1. Follow The Money
2. Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price
3. Semiconductor Memory Business Shrinking Fast
4. The Dollar Is Already Dead
5. DTAC: Survived 2019 but Pressured on All Sides. Maintain Reduce.

1. Follow The Money

• January data on investor positioning show a big improvement in risk appetite for Emerging Markets
• Two-year ahead returns from risk assets likely to be sizeable and positive
• However, not clear that we are yet definitely at the ‘bottom’
• Strongest convictions are to favour EM over US and China over India

2. Quick Take: Asian LNG Spot Prices Fall Below the UK NBP Gas Price

Asian LNG spot prices have dropped for a short time below the UK NBP gas price, reversing the established trend that sees Asian LNG offering a premium to the European LNG price benchmarks. This note takes a look at the latest trends in the LNG markets and the renewed plans unveiled by Qatar to challenge its competitors, in particular, those from the US.

3. Semiconductor Memory Business Shrinking Fast

Earnings have been announced for Intel, Samsung, SK hynix, and Western Digital, and the memory business is clearly undermining all of these companies’ earnings.  In this Insight I review each of the  companies to show where they are, and will explain what the future holds for them as today’s oversupply unfolds.

4. The Dollar Is Already Dead

The past year has all been about dollar strength. That is an accepted wisdom. But the truth of the matter is that the dollar averaged 93.6 on the DXY in 2018 (3 January 2018 to 31 December 2018) and, as we write, stands at 95.5. From 1 January 2015 to 1 July 2017 the DXY averaged 97.2. The dollar is not strong, even by recent history standards. Moreover, it is no longer as important as it once was in policy making terms – and neither is the Federal Reserve.

5. DTAC: Survived 2019 but Pressured on All Sides. Maintain Reduce.

Total Access Communication (DTAC TB) has emerged from a torrid 2018 and has survived. That was not always a certainty as the year progressed and their access to much of their spectrum expired. In the end DTAC managed to buy some 2x5MHZ of 900MHZ and 2x5MHZ of 1800MHZ spectrum and retain access temporarily to expired spectrum (the remedy). See DTAC 3Q Result: No Recovery Yet. Spectrum Issue Now Solved, but Leverage Is Rising.

However, survival has come at a cost. DTAC is paying a high price to TOT to rent its 2300MHZ spectrum (and is paying to build out the network), it has paid large sums to secure small amounts of 1800MHZ and 900MHZ spectrum to partially replaced expired concession spectrum and has agreed to pay to use equipment sitting on CAT’s infrastructure.  Finally it has moved to settle a number of disputes with CAT (discussed in Thai Telcos: Outstanding Liabilities to CAT/TOT Loom Post DTAC’s Partial Settlement) and pay them a net THB9bn. That clears the decks partially but there are some very large outstanding cases not covered (these relate to all three operators).

Latest results do little to suggest that good times are just around the corner. They were disappointing and suggest the Thai market will continue to struggle in 2019 as discussed in Emerging Asean Telcos 2019: Indonesia Looks Best Placed. Malaysia Improving. DTAC’s survival has led to increased competition in the market as it moves to win back customers and that suggests more earnings disappointment to come. We remain cautious and somewhat surprised by the strong move in recent days. We have a Reduce recommendation and THB32 target price.