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Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

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Equity Bottom-Up

<p><strong>We downgrade our recommendation to HOLD rating, from BUY, with a new 2021E target price at Bt3.45, from Bt4.14 previously, pegged to  12.7xPE’21E, which is a 3-years trading average of its forward PER. We attended the analyst meeting and came up with key information as followed;</strong></p><div>•TWPC posted net losses of Bt12m in 2Q20, from net losses of Bt39m in 2Q19 and net profit of Bt82m in 1Q20, as Covid-19 affected export supply chain.</div><div></div><div>•We believe 2Q20 should be a bottom for a year, given that it was directly hit by the Covid-19 and also business low season.</div><div></div><div>•According to the Covid-19 incident, TWPC decided to postpone some of its investment projects. Meanwhile, it did invest in two projects in 1Q20.</div><div></div><div>•There is a risk from the spread of Cassava Mosaic Virus. But we think the impact should be limited.</div><div></div><p><strong>We revised our 2020-22E earnings down by 45%, 27%, and, 24%, respectively. While the earnings should be bottomed out in 2Q20, we see an unexciting road ahead for the company, thus we recommend HOLD for the stock.</strong></p><p><strong>Background:</strong> Thai Wha Public Company Limited (TWPC) is an amalgamation of Thai Wah Starch (TWS) and Thai Wah Food Products (TWFP). Its products consist of tapioca starch and food goods such as vermicelli and rice noodle. The company has four tapioca factories in Thailand and one in Vietnam with a total capacity of 495,000 tonnes per year. The company exports to various countries and regions, namely China, Japan, Taiwan, Singapore, South Korea, Hong Kong, the US, and the EU.</p>

We downgrade our recommendation to HOLD rating, from BUY, with a new 2021E target price at Bt3.45, from Bt4.14 previously, pegged to  12.7xPE’21E, which is a 3-years trading average of its forward PER. We attended the analyst meeting and came up with key information as followed;•TWPC posted net losses of Bt12m in 2Q20, from net losses of Bt39m in 2Q19 and net profit of Bt82m in 1Q20, as Covid-19 affected export supply chain.•We believe 2Q20 should be a bottom for a year, given that it was directly hit by the Covid-19 and also business low season.•According to the Covid-19 incident, TWPC decided to postpone some of its investment projects. Meanwhile, it did invest in two projects in 1Q20.•There is a risk from the spread of Cassava Mosaic Virus. But we think the impact should be limited.We revised our 2020-22E earnings down by 45%, 27%, and, 24%, respectively. While the earnings should be bottomed out in 2Q20, we see an unexciting road ahead for the company, thus we recommend HOLD for the stock.Background: Thai Wha Public Company Limited (TWPC) is an amalgamation of Thai Wah Starch (TWS) and Thai Wah Food Products (TWFP). Its products consist of tapioca starch and food goods such as vermicelli and rice noodle. The company has four tapioca factories in Thailand and one in Vietnam with a total capacity of 495,000 tonnes per year. The company exports to various countries and regions, namely China, Japan, Taiwan, Singapore, South Korea, Hong Kong, the US, and the EU.

TWPC: Bottomed Out in 2Q20E but Unexciting Road Ahead

Thai Wah PCL

TWPC: Bottomed Out in 2Q20E but Unexciting Road Ahead