Thai Exports start growing again

According to the MoC, May exports expanded 7.7% to US$20.9 bn, increasing from the -3.7% YoY in April and on a MoM basis +23.7% as most industries have resumed normal operations.

Just briefly:

  • Industrial product exports (reps 73.2% of exports) was +9.5% YoY w/ autos +83.5%, electric appliances +11.8% and electronics parts +10.9%
  • Agri products (10.8% of exports) was -5% YoY mainly due to a drop in rice (-29%) and rubber (-27.5%) b/c of the government’s price guarantee program that has really hurt Thailand’s competitiveness.

The major export markets  for Thailand are:

  • Asia (66%) increasing +5.5%
  • Europe (9%) contracted for the 4th consecutive month but at a slower pace of -4.4% vs -25.7% in April, why? AUSTERITYYYYYY!
  • US Exports (10%) increased +10.9%YoY

 What to expect going forward?

  • There will be a trade-off between a lot of industries coming back on track since the floods last year, especially as seen with automotives, but with the EU being a major trading partner for most of Asia there may be some weakness as well, in the end we don’t expect any major strong growth trends, just a muddling through.

AOT – The cost of corruption

And this is the cost of corruption, the world’s longest radar breakdown happened at the airport earlier this week. I do hope one day people forego shot term personal benefits in exchange for long term growth for the country….

The simultaneous breakdown of both the main and back-up power supplies paralysed the radar system which guides flights through Suvarnabhumi International Airport for an hour.

A total of 49 aircraft were affected – 21 take-offs and 15 landings were delayed, while 13 flights were rerouted or returned to their departure point.

The radar breakdown may be the longest in the world for 45 years, and airline executives and pilots yesterday called the incident “inexcusable”

Source: Bangkok Post

PTT vs RPC Still ongoing

This tit-tat David vs Goliath battle is still ongoing. If you remember we wrote something earlier here Quick Comment: RPC Plc

Its appears as though RPC’s management and shareholders want to fully payout all of their retained earnings thereby rendering PTT unable to collect on overdue payments, it’ll be quite interesting to see what the outcome of this will be.

Satja Janetumnugul, PTT’s chairman, said his company should have filed the injunction before RPC’s shareholders at an extraordinary meeting on May 11 approved the dividend of 98 satang a share or 498 million baht.

Mr Satja said the dividend is from retained earnings totalling 512 million baht. RPC had total assets of 3.5 billion baht on March 31 including a refinery and biodiesel facilities.

Source: Bangkok Post

California Wow’s Ekkamai Landlord has had enough!

So my colleague wanted to go and exercise at California Wow’s Ekkamai branch on Monday evening and saw this…

followed by this…

Now not too long ago I wrote this post about California Wow (California WOW – Have they just figured out it’s a scam?), since the company had entered officially entered into bankruptcy it was/is by law allowed to continue operating but is legally not obligated to pay its rent to the landlords (amongst other things). Obviously the Ekkamai Land lord had had enough of this company taking advantage of free rent, and I know of another land lord that is looking to do the same, business is business if you can’t pay just leave, such a shame, there goes my membership…

Sectors – Weekly

The Thai market rallied last week towards the Greek election results in line with the rest of global market but again is driven by purely by headlines. As was the story in 2011 its the consumer related sectors and telecoms which are maintaining that markets levels due to the growth and dividend yields on offer, going forward expect similar stories about Europe and China continuing to affect markets both ways.

Continue reading Sectors – Weekly

Management trades – Weekly

Notable transactions:

Buys:

  • GLAND  – Massive off the market transaction here with 3.5% of the company’s shares being bought by two of the directors. Fyi GLAND is developing a huge project (condominium and offices) on Rama XI next to the new Central Rama XI shopping mall
  • RS – K. Surachai the CEO, VP and MD of RS must see upside in the company’s move towards the satellite business
  • SIRI – Time to sound like a broken record here, but if you’ve been following this blog long enough, you’ll know that K. Srettha wants to ensure his stock price continues to go up.
  • BLAND – Not highlighted in yellow b/c the value is small but hello again K. Anant! Will you be selling soon?!

Sells:

  • BGH – A director decides to sell a stake, nothing major I presume

LVT cements its market niche

Originally published Friday 22nd June 2012

LV Technology Plc was founded in 1996 by Hans Jorgen Nielsen, a Danish engineer who has more than 30 years of experience in the cement industry. LVT was founded based on a new and revolutionary power-saving technology for the grinding process, for which it has supplied more than 700 units in 75 countries. It has since developed into a company that supplies complete cement plants worldwide. Mr Nielsen discusses the company’s strategy and outlook.

What is LVT’s business model?

LVT is an engineering company within the cement industry. Over the past few years we have made a natural progression from providing pure cement plant engineering services to incorporating our engineering skill and technological know-how into delivering completely built cement plants to our customers.

Continue reading LVT cements its market niche

Emerging Market Small-cap stocks outperform

Saw this in Bloomberg, it states what we believe that small-caps do generally outperform large caps and indexes over time, interesting to note that their definition of a small cap is USD 2 bn (THB 60 bn), our own definition for the Thai market is USD 200 mn (THB 6bn).

According to financial research firm MSCI, emerging-market small-cap stocks delivered better long-term performance than their large-cap brethren, with less volatility. That amounted to a 14.1 percent annualized return during the past decade, among the best of any asset class. They’ve also provided better portfolio diversification in recent years. While price movements of emerging-market large-cap stocks were in line with those of the Standard & Poor’s 500-stock index 84 percent of the time in the past three years, that figure was only 69 percent for small caps.

Source: Bloomberg

SCB and TMB merger in play?

In the news this morning the Thai newspaper Kao Hoon reported on rumours that Siam Commercial Bank (SCB) is in talks with the Ministry of Finance (MOF) to buy its 26% stake in TMB through a share swap ratio of one SCB share to 60 TMB shares. 

The key issue with this transaction lies with the valuation and the fact that the MOF will not sell below P/BV 2x as it would then have to recognise a loss on the investment in TMB.

If SCB were to purchase TMB then the mathematics would be as follows:

  • SCB would have to issue approx 190mn new shares at around THB 140/share to swap for 11,300 mn TMB shares held by the MOF at about THB 2.4 / share.
  • Following on from this, under SEC rules, SCB would then have to launch a tender for the remaining shares in TMB held by other parties, which includes ING’s 25% stake. If SCB were to issue further shares to cover this transaction at the same valuation, it would result in current shareholders being diluted by about 20%.

So why would this transaction make sense if:

  • SCB is already the most profitable bank in Thailand
  • Has strong NPL ratios (2.85%) versus TMB’s (7%)
  • This transaction is expensive, it would weaken SCB’s balance sheet, ok it may improve its Assets under management statistics, but then shareholders are diluted by 20%. A turnaround play perhaps? I highly doubt it, ING has been trying to do this for years and turnarounds can take a far longer time to play out.
In the end:
  • If you want to play this news, your brokers are probably saying short SCB long TMB, I digress, that rarely works in the Thai market, if you look back the trend is normally just simply long both counters.
  • We’ve traded TMB in the past based on speculative news and looking back consider ourselves to have been lucky to make a profit. We won’t be trading on this news at all.
  • Oh and a quick note: The MOF holds a 23% in SCB through the Vayupak Fund – Conspiracy Theories begin now…