Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,114.16 -11.98 -0.38%
Hang Seng 26,719.58 -128.91 -0.48%
Dow Jones 26,770.20 -255.68 -0.95%
Shanghai Composite 2,938.14 -39.19 -1.32%
Phillip: 3 Thai Stocks You Need To Buy
Aspire, Hot Picks | 16 March 2015
By: Lim Si Jie
Articles (169) Profile

Source: FactSet, chart comparing the SET (Blue), STI (Green), and HSI (Red) in the quarter-to-date

As can be seen in the chart above, the Stock Exchange of Thailand (SET) index has outperformed that of both Hong Kong’s HSI and Singapore’s STI in the quarter-to-date.

In addition, Asian bourses on the whole, could see an uptick of capital inflows after Europe’s QE programme officially begun. Despite this likely inflows, the global forecast for the Asian markets remains cautiously optimistic as global investors look to the Asian market for bargain buys.

SET: Approaching Fair Value?

However, Phillip notes that “current valuation of above 15x forward P/E” makes the SET index slightly more expansive than its peers.

In addition, the SET index has a high P/BV and low ROE which is below the average in comparison to Asian indexes. That being said, investors might still be keen to add Thai stocks into their portfolio for geographical diversification.

Selective Strategy: To Capitalize On Ranging Market

A selective strategy looks to be the most suitable strategy to benefit from a choppy, range-bound market environment with a strong focus on dividend stocks in a fair valued market. According to Phillip, it is “best to gradually book profits around resistance levels of 1,630-1,650 points” and “cut loss” if the SET index breaks below 1,580 points.

1. AP: Strong Presales Tips Growth

Solid presales

AP’s management has set FY15 total presales growth target of 24 percent. Total presales in the first seven week of FY15 were exceptionally effective due to the selection of locations for new projects and the changes in house plans. AP plans to increase the number and value of new project launches this year in a bid to boost presales to meet the above target.

FY15 profit growth outlook

Top-line revenue expansion and tighter expense controls would be key drivers of profit growth for AP in FY15. Phillip forecasts FY15 profit growth of 16 percent YoY (Year-on-Year) based on assumptions that AP will “achieve 10 percent YoY revenue growth” while tighter controls on operating expenses should “push net margin higher.”

Cheap valuation

Exceptionally strong presales and profit growth momentum is likely to be the catalyst for AP to return to trade at its historical P/E average of 8x-9x from current levels of 7x. AP also has an estimated dividend yield of almost fice percent.

Investment rating: BUY, FY15 TP 7.80 Baht

2. MFEC: Compelling Dividend Yield

FY14 Increased Profits

In FY14, MFEC gained a 16 percent YoY rise in net profits to 270 million Baht while also offsetting a contraction in margins in FY14. This is largely attributed to an eight percent YoY sales growth and a retreat in SG&A expenses.

Growth from Technological Developments

A steady flow of IT investments in telecommunications and financial sectors from technological developments would be a key driver of the earnings growth for MFEC. At the end of FY14, MFEC had a backlog of around 1.6 billion Baht to be realised as revenue in FY15. On top of that, MFEC has plans to bid for new projects to grow its backlog.

Investment rating: BUY, FY15 TP: 9.80 Baht

3. Thoresen Thai Agencies (TTA)

Phillip picked TTA in the dry bulk shipping space because of its diversified revenue streams. This should absorb some of the pressure from the current slump in the BDI.

Capital Raising Process Underway

TTA is expected to raise more than 7 billion Baht in fresh capital from the rights issue to fund business expansion and investment in other businesses, which may provide a significant boost to its bottom-line. Its recent acquisition of a 9 percent stake in SINO would allow TTA to earn between 250 million – 300 million Baht in profit contribution from SINO this year.

Investment rating: BUY, FY15 TP: 22.50 Baht

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.