DOD: Pronounced Growth Prospects, but Stock Is Fully Valued

We initiate coverage on DOD with a HOLD recommendation based on a target price of Bt7.55, implying a downside of 6% from the current price. We derive our target price from the PB/ROE of Thai Consumer Staples and apply a 15% small-cap discount.

Investment thesis:

• Network marketing creates a new sales channel with tremendous growth potential
• Recent acquisition expands cosmetics manufacturing capacity
• Significant R&D spending necessary to remain competitive

Risks: Dependent on a few large clients and intense competition, lack of long-term contracts, inability to collect receivables, non-compliance with health standards, unable to find competent people to fill c-suite positions.