In this briefing:
1. SCC (SCC TB): Potential Beneficiary from US-China Trade War
- Share price is less volatile, cheap on a PE basis, and good chance of target-price upgrade relative to its sector
- Plans for cement export to US buyers as they face higher prices from China as a result of trade war
- Gross margin support from comparatively lower cost as SCC has secured 80% of its coal requirement for 2019 in face of rising coal prices
- SCC trades in line with Thai Materials at 19CE* 9.6% ROE/PB
- Risk: Lower than expected cement price, uncertainty regarding US-China trade war
* Consensus Estimates
2. Revisiting the Renewable Energy Space
We checked on two stocks today that are well-known in the renewable energy space, namely solar and wind power, to see how things were going. We may not be tree huggers ourselves, but it’s fair to say that sustainable investing is pretty big these days. Here’s some run-down.
- GUNKUL posting impressive earnings growth of 57% (normalized) on the back of a 30% revenue growth, and they’re still hoping to see another 25% revenue growth in 2019 as new projects in Japan and Thailand (floating panel) start operations soon.
- DEMCO also growing earnings 23% on the back of more modest revenue growth of just 6%, but management is far less confident on this front having faced issues with land reclamation rights and design changes.
- An interesting point in the visit was the fact that GUNKUL wants to establish a very large base of solar roofs by the time prices become competitive. Solar panel prices have fallen tenfold since they were first introduced in Thailand.
