Daily Strategy for Investors on May 13, 2019

Daily Strategy for Investors on May 13, 2019

Asia Wealth Securities (AWS) has made an analysis for the trading session on May 13, 2019, stating that the hot topic of Thai stock market today is the conclusion of the US-China trade war which caused the market to heavily fluctuate throughout the past week.

Unfortunately, the fluctuation is expected to continue this week, although the US Finance Ministers and US trade representative recently announced that they have reached a constructive conclusion on trade negotiations with China. This was after the US President announced to raise import tariffs from Chinese goods to the US from 10% to 25% on Friday during the business hours in Thai stock market.

In addition, foreign stock markets open in a negative territory this morning, including in Australia, Japan and South Korea. In addition, for domestic factors, performance of listed companies in 1Q19 came out rather disappointed such as IRPC, BCP, BANPU, etc.


Today, AWS recommends investors to be cautious in investing and to increase cash holding ratio. AWS still weigh the long-term image that the US-China trade war might reach the End Game with a good conclusion with around 60%-70% weight. AWS recommends to wait for performance to be announced and buy when the price becomes weak.

AWS expect this week’s index range to be 1,630-1,670 points while today’s index range to be 1,640 -1,660 points. Outstanding stocks today are XO, CPF and CPALL.


Pick of the day XO (Bt12.90; BUY; AWS TP Bt14.70)
The 1Q19 performance was bright as expected at Bt68mn. The gross profit margin for this quarter was 40.2%. We expect a full year net profit growth of 5.9% to THB 267 million as 1) it is expected that sales will be 10-15% higher according to company’s goals as Sriracha chili sauce became more popular among Westerners 2) Gross profit margin in 2019 is expected to be close to the company’s target of 40% due to the reduction of production cost by fixing raw material price to low level by mid-2020 3) The company is preparing to expand the factory to build a chili pickle plant which is expected to maintain raw material costs for longer. 4) There is more room to increase production capacity as it currently uses only 50%-60% capacity utilization rate. Recommend BUY with 2019 target price of Bt14.70 based on a 22x PER.

XO’s price pattern is very strong in a full uptrend from Daily, Weekly, and Monthly Buy Signal. Giving XO’s price pattern, it indicates a continue New High with the next goal of making a new high at Bt13.70. XO’s short -term stop loss point is at Bt11.80 (Resistance: 13.00, 13.10, 13.40; Support: 12.80, 12.70, 12.40)


Crude oil price : WTI for June delivery dropped 4 cents, or 0.1%, to close at USD61.66/barrel; Brent for July delivery rose 23 cents, or 0.3%, to close at USD70.62/barrel due to concerns on lower demand for fuel generated from the uncertainty of world economy and concerns on the trade war between the US and China despite a sign that the global energy market will become more tight.

Oil prices still were driven by tight conditions in the oil market from OPEC’s reduction of production capacity and the US sanction on Venezuela’s oil export and the cancellation of waiver for 8 countries to import oil from Iran. Baker Hughes, a US oil drilling services provider, revealed that the US active oil rig has decreased by 2 this week to 805 rigs which is the lowest level in 1 year.


Local News:
The Central Committee on Prices of Goods and Services approved the measure proposals, which will require private hospitals to clearly display the prices of medicines as well as give patients the opportunity to buy medicines from pharmacies outside the hospitals using prescriptions provided by their doctors. (Bangkok Post) Comment: Such measures gave no surprise as they were in line with the street’s expectation while most of the major hospitals have already disclosed their prices of medicine and medical services. However, whether there will be more measures remains to be seen. Maintain NEUTRAL call for the sector.

Finalized the High-speed deal after the consortium led by CP group has agreed with the MRTA. Afterward, the deal summary will be sent to the EEC committee for approving today (13 May).


ADVANC (AWS TP Bt225.00), TRUE (IAA Consensus Bt5.80) and DTAC (IAA Consensus Bt53.50) applied an extension to pay 900 MHz from 4 to 10 years. However, 3 operators will consider the criteria from NBTC on 14 May 2019 before deciding whether to obtain the 700 MHz or not.

NBTC revealed that 7 Channels will refund the TV digital license  such as Bright TV,Voice TV, MCOT Family, Springnews, Spring 26, 3 Family and  3 SD. By this step, 7 entrepreneurs must submit the results to NBTC within 60 days. After that, NBTC will consider the broadcast end date which the whole process is expected to be completed by August 2019.

EA (AWS TP Bt49) reported 1Q19 net profit of Bt1.21bn (-37% YoY, + 57% QoQ). If the extra items were deduced, the normalized profit would be Bt1.13bn, better than Bloomberg consensus 2% (SET). Comment: We think the company is entering into a heavy investment period of the battery and electric car businesses. We expected the company to take more than 2 years to reach break-ven point. Thus, we recommend only HOLD.

CPF (AWS TP Bt30) reported a 1Q19 net profit of Bt4.28bn (+ 40% YoY, + 155% QoQ). If the extra items are deduced, the 1Q19 normalized profit is Bt3.02bn, better than Bloomberg consensus 48% (SET) Comment: Earnings are better than expected, supported by improved swine and broiler prices, plus the feed, such as soybeans and corn, decreased. Maintain BUY recommendation with a target price of Bt30.00.


Prepares to submit the design of Terminal 2 to NESDB. The Airport of Thailand (AOT) is ready to send the new design of terminal 2 to the National Economic and Social Development Board (NESDB) for approval. The new design will have its luggage conveyor belt system and automated passenger transport linked with Terminal 1. After approved by the NESDB, AOT will forward to set the budget for hiring private construction designer.