DOD: Strong Performance Deserves a Re-Rating

We upgrade our recommendation on DOD to BUY from HOLD based on raising our target price to Bt10.70 from Bt7.55, implying an upside of 26% from the current price. We revise our forecast upward and roll over our target price to the 2021E 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

Interim: DOD continues to deliver strong results, as 2Q20 has demonstrated. Our previously cautious stance towards future growth prospects has turned more optimistic, based on DOD’s strategy to realize high growth opportunities.

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.