In this briefing:
- Thai Telecoms: Slowdown in Mobile Business Continues.
- After You Looks Beyond Thailand For Opportunities
- The Week that Was in ASEAN@Smartkarma – Doubledragon, Indonesian Property, and UOB’s Bad Loans
- Delta Electronics (DELTA TB): Thoughts on the IFA’s Valuation Range
- LNG: What Matters This Week? Prices Fall Further in Asia but New Projects Continue to Progress
1. Thai Telecoms: Slowdown in Mobile Business Continues.
The Thai mobile market reported another weak quarter in 4Q18, with trends deteriorating at all three operators. The weakness was partly due to the cheap unlimited fixed speed offers which were popular in 2018 but which have now been removed from the market. Growth should recover by 2H19. With Total Access Communication (DTAC TB) having acquired spectrum in 2018, it will no longer cede market share without a struggle. That suggests competitive risks are high in Thailand, with all three operators aiming to boost market share. We remain cautious on the sector and are also worried that the government seems keen to push on with 5G spectrum auctions despite a lack of use cases.
2. After You Looks Beyond Thailand For Opportunities
We met up with management of two companies whose industries couldn’t have been more different. This is the quick run-down on what they are up to recently:
- After You posted 14% earnings growth on the back of 20% revenue growth. While this remains healthy, it realizes that domestic market opportunities will become more limited and has started to look abroad with HK as its first market.
- Locally, the desserts leader is still planning a slew of new products and some in exclusive partnerships with various airlines such as Air Asia and Thai Smile.
- In an effort to reduce storefront expenses, they will start selling certain products outside stores and even online, now 3% of total sales.
- Amata’s earnings crashed 28% in 2018 on the back of 2% revenue decline, as Vietnam retroactively forbid certain land sales and even fines the company for past transactions that abided with the law back then!
3. The Week that Was in ASEAN@Smartkarma – Doubledragon, Indonesian Property, and UOB’s Bad Loans
This week’s offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
This past week’s highlights include three Smartkarma Originals Insights, with a deep dive on orphan stock Doubledragon Properties (DD PM) by Nicolas Van Broekhoven and Lloyd Moffatt and individual company Insights from Jessica Irene on Pakuwon Jati (PWON IJ) and Angus Mackintosh on Alam Sutera Realty (ASRI IJ) in an ongoing series on Indonesian Property.
Macro Insights
In his economic Insight, When Job ‘Quality’ Prevailed over ‘Headcount’, Philippines Economist Jun Trinidad examines the recent encouraging employment numbers in the Philippines.
Equity Bottom-Up Insights
In a Smartkarma Originals Insight, DoubleDragon Properties (DD PM): From Overhyped to Undervalued; Multi-Bagger in the Making?, CrossASEAN Insight Providers Nicolas Van Broekhovenand Lloyd Moffatttake a deep dive into this large-cap orphan stock and present a compelling buy case for the company.
In the third individual company Insight in this Smartkarma Originals Series, Indonesia Property – In Search of the End of the Rainbow – Part 3 – Pakuwon Jati (PWON IJ), Jessica Irene takes a deep dive into this high-quality property developer.
In the fourth individual company insight in this Smartkarma Originals series, Indonesia Property – In Search of the End of the Rainbow – Part 4 – Alam Sutera Realty (ASRI IJ), CrossASEAN Insight Provider Angus Mackintosh takes a deep dive into this leading township developer.
In UOB – Driving Bad Loans, Daniel Tabbush zeros in on this leading Singapore bank’s loan quality and finds all may not be well despite headlines showing improvement.
in Krung Thai Bank: Not as Cheap as It Looks, Paul Hollingworth revisits Krung Thai Bank Pub (KTB TB) and despite originally finding the bank attractive on a number of valuation measures, now finds less to cheer about.
In GLOW’s Done Deal As SPA (Almost) Completes events specialist David Blennerhassett circles back to this ongoing takeover situation.
In Company Visits: Berli Jucker, M Visions, our Thai Guru Athaporn Arayasantiparb, CFA reports back following visits to the two aforementioned companies.
In his insight, Geo Energy (GERL SP): Recovery in Coal Price from 4Q18 Bottom; Continue to Wait for M&A Action, Nicolas Van Broekhoven circles back to this Geo Energy Resources (GERL SP) which reported weak 4Q18 results late last month.
in Keppel Infrastructure Trust Placement – Scaled Down but Large Deal; Very Well Flagged Deal, Sumeet Singh reports back on this recent placement.
In Lippo Malls REIT – Acquisition of Lippo Mall Puri Announced. Dilutive Rights Issue ComingRoyston Foo reports back on this Singapore listed Indonesia focused REIT following the announcement of a rights issue.
Sector and Thematic Insights
in Snippets #20: Dark Clouds in Thai Equities, Athaporn Arayasantiparb, CFA highlights interesting trends/events/developments he heard this month, and highlights five which could impact Thai equities in the near term.
In Singapore Property – February Sales Data Support Investment Thesis on Sing Holdings, Royston Foo examines the most recent property sales figure coming out of Singapore.
4. Delta Electronics (DELTA TB): Thoughts on the IFA’s Valuation Range
Delta Electronics Thai (DELTA TB) (Delta) released its opinion (Form 250-2) and the opinion of the Independent Financial Advisor (IFA) on the tender offer. Delta Electronics (2308 TT) (DEI) launched the conditional voluntary tender offer for Delta, an electronics contract manufacturer, on 26 February 2019. The tender offer of THB71.00 cash per share values Delta at an EV of THB72 billion ($2.2 billion).
The IFA valued Delta at THB62.33-67.80 per share. Unsurprisingly, both the Delta Board and the IFA concluded that the shareholders should accept the tender offer. While the tender offer’s premium to underlying value is unlikely to set the pulse racing for minority shareholders, we continue to recommend minority shareholders to accept the tender offer.
5. LNG: What Matters This Week? Prices Fall Further in Asia but New Projects Continue to Progress
LNG prices have dropped to a seasonal low, as we flagged in our outlook piece for this year (2019 Energy Market Themes & Stocks with Exposure: Focus on Oil, Refining, LNG, M&A & Renewables) but this hasn’t dampened enthusiasm to push new projects forward (see A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies). We continue to see this as positive for the LNG contractors and negative for the LNG developers. We discuss recent LNG prices, European LNG demand and the FID outlook including project updates from Venture Global, Alaska and Cyprus.
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