Asia Wealth Securities (AWS) has made an analysis for the trading session on October 7, 2019, pointing out some of the must-know events in the equity market as follows:
1) US stock market rebounded in responded with good US employment figures and unemployment rate that dropped to 3.5% which is the lowest level in 50 years and below 3.7% as analysts had expected. It is expected to drive the stock market this week to rebound.
2) Investors expect the Fed to cut interest rates. The FedWatch’s tool of the CME Group indicates that investors expect around 79.6% chance that the Fed will cut interest rate by 0.25% at this round of Monetary Policy Meeting.
3) Expect the 3Q19 net profit of the commercial banking sector to remain weak due to the provision of reserves and a low level of loan growth according to a weak economy in the 3Q19.
4) Expect a performance of energy and petrochemical sectors to heavily pull down rather than to support. This is due to poor petrochemical spreads and stock loss although the refinery’s performance could help but not that much.
5) China’s Golden Week accommodates the tourism industry. Recommend “BUY” on AOT and BAFS.
6) Today’s investment strategy: The positive effect of a lower interest rate is expected to accommodate the hire purchase and personal loan business groups. However, it is expected to pose a more negative effect on large commercial banks. The appreciation of the baht has been a major obstacle to export business. Therefore, do not buy stocks in imported food and electronics sectors.
7) This week’s index range is expected to be 1,590-1,624 points. Recommended stocks are KKP and KTC.
8) Today’s index range is expected to be 1,600 -1,620 points. Recommended stocks are KKP, KTC and AOT.
Stock & Comment
KKP – TP ฿80.00/share
KTC- TP ฿52.00/share
AOT- TP ฿84.00/share
Pick of the day: KKP (BUY AWS TP Bt80.00)
AWS estimates KKP’s 3Q19 earnings of Bt1.6bn, up 9.4%YoY and 15.4%QoQ, driven by the increase in NIM due to a 0.25% lower interest rate. In addition, it is expected that non-interest incomes may well rise by 3% approximately after receiving IB income from deals such as IPO Do Home, etc.
Meanwhile, loans in 3Q19 are forecasted to be about Bt230bn, up 8.6%YoY and 2.1%QoQ, mainly due to the growth in corporate loans.
Good dividend yield gives KKP another outstanding point as AWS anticipates the company to pay a dividend of Bt5.50 per share for the year 2019, which is accounted for a return of 8.6% per year. Thus, AWS reiterates its BUY call with a target price of Bt80.00 based on a 1.50x Prospective PBV method.