Brief Thailand: Sathorn Series N: Thai Cryptocurrency Regulations Update and more

In this briefing:

1. Sathorn Series N: Thai Cryptocurrency Regulations Update
2. SNC: Downgrade to “HOLD” to Factor in Gloomy Outlook
3. Political Pit Stop (February): Candidate Rosters Out

1. Sathorn Series N: Thai Cryptocurrency Regulations Update

The cryptocurrency regulatory framework in Thailand is still less than a year old, but after going through the details, we find that:

• Operators. Three exchanges have already been licensed. In addition, coins.co.th has already been licensed as both broker-dealer.
• Definitions of cryptos and digital tokens as well as defining industry structure and practices similar to what we already have in equities.
• Flexible application process. Regulators don’t actually define a period by which operators will get licensed by them, but will allow them to operate until their application is rejected.
• Learning process. Given how brief the regulatory outlines are at this phase, we believe they are also learning the ropes at the same time as everyone else. Operators that apply will probably have significant dialog with regulators before they get approved.

2. SNC: Downgrade to “HOLD” to Factor in Gloomy Outlook

SNC’s 4Q18 net profit dropped 39%YoY to Bt72m, lowest in past five quarters.  

• The drop in sales to Bt1.288m (-19%YoY) and the rise in SG&A to sales from 6.6% in 4Q17 to 9.6% are major contributors to the drop in earnings.
• Overall, FY18 net profit was Bt431m (+6%YoY) despite 14% decrease in sales. The strong improvement in its 2018 earnings was due mainly to high restructuring costs in 2017.
• We maintain neutral view toward its 2019-20 outlook due to slow recovery in overall industry.

We cut our target price by 17% to Bt14 (9.6xPE’19E) and downgrade from “BUY” to “HOLD” for gloomy outlook. Despite limit upside, current share price is still cheap compared to historical trading and offer an attractive dividend yield (6.5% in 2019-20E).

3. Political Pit Stop (February): Candidate Rosters Out

With royal approval of the election date on March 24, we are finally in the last leg of the election race. Some key developments:

• Candidate roster: Each party is allowed to put up three PM candidates, and it’s no surprise that the three front-runners in the polls, Gen Prayuth (incumbent), Sudarat of the Thaksin faction, and Democrat leader Abhisit, are all there.
• Air pollution in spotlight. Arguably, the most successful campaign message so far has been the Thaksinite attack on the government’s poor handling of air pollution. Definitely get a few brownie points there.
• Different positioning. We observe clearer differences in the campaign positioning of each political parties. Given the negative mood in Thailand over pollution and the economy, it appears that Thaksinite focus on the government-related negatives is working best at the moment.’
• Economic backdrop. Economics can affect election results in Bangkok and in general, it is not favorable to the current government. We expect the Democrats to win easily in Bangkok, though a few seats will be ceded to the Thaksinites and Future Forward.