The SET Index is expected to move between 1,610 and 1,680 this week and small and mid-cap stocks with upside potential are recommended as an investing theme. DBS Vickers Securities (DBSVS) has selected DCC, MICRO, SC, and SNC to its Top Picks.
DBSVS expects that listed companies’ earnings will drop quarter on quarter in 3Q21 as a result of the lockdown imposed in 29 high-risk provinces during the peak of the COVID-19 pandemic, but will rebound from 4Q21 onwards as most restrictions are lifted and the plan to reopen the country in October remains on track. Additionally, between September and December, Thailand is slated to import approximately 50-70 million doses of COVID-19 vaccine.
There are also external issues to consider, such as 1) the Fed is likely to reduce QE at its meeting on September 21-22, but the chairman has indicated that Fed is not in a rush to raise interest rates, 2) U.S. nonfarm employment increased by 235,000 in August, which was below projections, and the unemployment rate dropped to 5.2%, 3) WHO is also on the watch for the MU strain that is capable of evading vaccine immunity.
Nikkei Asia publishes the COVID recovery index, revealing that Thailand ranks 118th out of 121 countries.
Factors to follow: 1) COVID-19 situation and vaccine distribution, 2) Thai politics, 3) impact of Hurricane Ida.
DCC : “BUY” recommendation with a target price of ฿3.50/share
DBSVS recommends “Buy on Weakness” on Dynasty Ceramic Public Company Limited (DCC) despite sales declining 8% YoY and 10% QoQ, GPM increasing to 43.6%, and SGA continuing to decline. Moreover, sales are likely to recover in 4Q21 following lockdowns easing. DBSVS favors DCC on the efficiency of cost management and sales would regain its momentum once the COVID-19 situation improves. DCC also has an upside from outlet rental revenue and comprehensive building materials centers.
MICRO : “BUY” recommendation with a target price of ฿13.00/share
Micro leasing Public Company Limited (MICRO) plans to open two additional new stores in 2H21 and to launch a full insurance brokerage company in 4Q21, therefore DBSVS anticipates a brighter outlook for MICRO for the rest of the year. MICRO aims to decrease the NPL ratio to 3% and Coverage ratio to 100% as of the end of 2022. Earnings are expected to increase by 33% and 40% in 2021 and 2022, respectively.
SC : “BUY” recommendation with a target price of ฿4.78/share
SC Asset Corporation Public Company Limited (SC) anticipates achieving its 20 billion baht presales and 19 billion baht transfer targets in 2021. SC owns both high-rise and low-rise properties and generates recurrent revenue from rental revenues. DBSVS expects SC to pay a dividend yield of approximately 6-7 percent each year on average due to its strong cash flow and liquidity.
SNC : “BUY” recommendation with a target price of ฿18.50/share
Profit outlook for SNC Former Public Company Limited (SNC) in 3Q64F is projected to decelerate QoQ on seasonality. Then it will return in 1Q-2Q next year, which is in line with the direction of the air conditioner industry. Orders remained robust and are likely to continue through 2022, particularly in the OEMs, which benefited from the relocation of manufacturing sites to Thailand. DBSVS forecast SNC’s 2021-2022 earnings to expand 26% and 23%, respectively, while EPS Growth would increase 16% and 6%.