Daily Strategy for Investors on July 17, 2019

Daily Strategy for Investors on July 17 , 2019

Kasikorn Securities (KS) has made an analysis for the trading session on July 17, 2019, stating that the SET Index on Wednesday, President Trump threatened to raise tariffs on Chinese goods while Iran said it was ready to talk with the U.S.
The SET Index is expected to trade within 1,720-1,740. Top picks are DTAC, TRUE, JASIF.

President Trump threatened to raise tariffs on Chinese goods
– U.S. equities dropped after President Donald Trump indicated no progress had been made in U.S.China trade talks and threatened to raise tariffs on Chinese goods. Such talk ignited worries over a re-escalation in the trade dispute that could hurt crude oil demand.
– The oil price retreated on easier U.S.Iran tension with Dubai crude estimated to be range-bound between USD60-70/bbl. Stock sentiment today will come under pressure from energy counters and the trade dispute jitters.

SET Index expected to trade in 1,720-1,740 range
– KS expects the SET Index to swing between 1,720-1,740 as investors evaluate 2Q19 results, the bond yield and the direction of the baht after global central banks cut rates to depreciate their currencies and boost exports. Any impact from the BoT’s measures to curb baht speculation will likely be short-lived, while the Thai central bank will probably have to cut rates along with others in the medium run. 

– The Cabinet will announce its policies to the Parliament on July 25. Investors should keep an eye on stimulus measures to boost domestic purchasing power (retailers), expressway concession renewal and concession awarding for the new MRT lines (BTS, BEM), developments on mega projects such as the EEC (GULF, PTT, contractors, industrial estates), tourism stimulus (AOT, hotel), the FTA (exporters) and a minimum wage hike.

2Q19 previews today:
ROBINS (KS project net profit at THB663 million, -4.4% YoY -12.9% QoQ); BEAUTY (project net profit at THB48 million; -81% YoY, -31% QoQ). 

AOT reported that the number of foreign tourists rose 3.2% YoY during July 1-13 vs. +1.7% YoY in June.
– Property and infra funds have lost 3% since their July 11 peak, pushing the dividend yield to 5%.KS views the correction as an opportunity to accumulate these stocks amid an interest rate downtrend and the imposition of a 15% tax on fixed-income funds.

Investment strategy:
Adjust portfolio with a limited focus on a few stocks while maintaining flexibility to accumulate stocks later. Stocks to watch:
1) Those that will benefit from government measures: CPALL, GLOBAL, AMATA, BTS, ORI, TFFIF
2) Dividend plays: JASIF, TISCO, LH
3) ICT plays that will benefit from less competition (more revenues, lower costs): ROBINS, BJC, CENTEL, TRUE, ORI
4) Stocks that will benefit from IMO 2020: TOP, PRM, BGC
5) Stocks with a specific catalyst: CPF, GUNKUL, TPCH, MINT, PTT
– Take profit/Cut losses in CPN, FPT, STEC, CK, BGRIM, AP, QH, SCB, ROBINS, BJC, CENTEL, AOT, SYNEX, RJH
– Take profit from pair trade strategy of long BTS/short BEM (up 18% since our initial recommendation on June 13) and long STEC/short CK (up 3% since our initial recommendation on June 13)

Top picks today:
DTAC closed on Monday 15 July 19 at THB56.00. KS sets the target price at THB62.49. EBITDA/core profit in 2Q19 met expectations on better cost control, revenue recovery. KS anticipates THB8.60/share upside from cell site divestment;
TRUE closed on Monday 15 July 19 at THB6.40. KS sets the target price at THB7.77. TRUE has less competition toward the end of the 4G cycle and delayed the auction of 5G spectrum will turn free cash flow positive in 2021.
JASIF closed on Monday 15 July 19 at THB11.50. KS sets the target price at THB12.82/ share. KS views JASIF as a buying target for funds given its high dividend yield of 8% and strong interest fueled by the new LTF policy, which should spur investment in infra funds. The dilution effect on the share price should be limited (price will not fall below THB9.8516 while the total recapitalization amount will be no more than THB2.5 billion). The capital increase plan is subject to SEC approval, which is expected in 2-3 months.

Daily Picks:  
Daily Picks  Trading Target
DTAC             58.00
TRUE             6.90
JASIF            11.90

Monthly pick:
AMATA, SCB, CK, STEC, CPALL, TFFIF, CPF, TRUE, DTAC, KTB