10 topics to ruin your summer

Ahhh the wonderful quarterly letter from Jeremy Grantham of GMO, is out and it has its usual combination of wit, investment thoughts and curiousity all melded into one paper. This quarter he discusses a list of ten topics that are not positive at all for the world, but he does add in his usual but human are innovators and perhaps things won’t be so bad at the end. All in all a great quarterly read as usual, here are the 10 topics and a link to the pdf.

  1. Pressure on GDP growth in the U.S. and the balance of the developed world: count on 1.5% U.S. growth, not the old 3%
  2. The age of plentiful, cheap resources is gone forever
  3. Oil
  4. Climate problems
  5. Global food shortages
  6. Income inequality
  7. Trying to understand deficiencies in democracy and capitalism
  8. Deficiencies in the Fed
  9. Investment bubbles in a world that is, this time, interestingly different
  10. Limitations of homo sapiens

Source: GMO

Thailand’s shadow economy among biggest worldwide


It’s no surprise to those of us who live here that Thailand has a huge black market economy that doesn’t show up on official statistics, here are some intriguing facts:

  • Thailand’s informal economy, the non-regulated, non-taxed part of its overall economy, made up 40.9% of the country’s GDP in 2014.
  • Taking Schneider’s number, in money terms, the shadow economy in Thailand would have generated more than $155bn of illicit revenue last year. ”If this revenue was just taxed by the general 7% value-added tax, the Thai government could have brought in almost $11bn for state coffers, 12 times more than it has earmarked for desperately needed water management projects for 2015 and 2016 to cope with droughts and floods that alternately batter the country,”
  • Bloomberg Business ranks Thailand seventh-biggest shadow economy in the world as per the share of illicit revenue of a country’s GDP. On the list, the “Land of Smiles” appears alongside Peru, Bolivia, Ukraine, Belarus, Tanzania, Zimbabwe, Haiti, Guatemala and the likes, and within Southeast Asia, it comes along with Myanmar, Cambodia and the Philippines.
  • In an earlier World Bank ranking, Thailand is even prominently listed at a 50+-percentage its informal sector is contributing to GDP.
Source: Gulf Times

What Do CEO’s Think About The ASEAN Opportunity?

A wonderful article over at Forbes that highlights the CEO’s of MNCs viewpoints on ASEAN, here’s the introductory paragraph and the link to the rest of the article

In early 2015, I interviewed eight C-level executives at leading foreign multinationals as part of a KPMG sponsored report exploring the outlook for multinationals (MNCs) in ASEAN. What did they have to say?

It’s easy to get excited by the ASEAN opportunity. The region’s $2,460 billion economy and 600 million consumers rightly capture the world’s attention. The prospect of a single market with the arrival of the ASEAN Economic Community (AEC) later this year makes the story even more compelling.

But headline figures also disguise the region’s complexity. It’s an opportunity spread across 10 countries; incomes per capita can range from just $1,600 in Laos to $56,000 in Singapore; single cities such as Bangkok with its 10 million inhabitants have larger populations than Lao’s 6 million.

And that’s why it’s so important to understand what CEOs from leading companies such as Caterpillar, DHL, Shell, and HP are thinking. It’s one thing to get excited by the numbers, it’s another to successfully execute strategy.

Source: Forbes

Co Visit: Erawan Group Plc (ERW)

Complete market coverage the key for Erawan

The Erawan Group Plc (ERW) operates more than 5,000 hotel rooms ranging from budget to luxury, and aims to become Thailand’s leading hotel developer and investor. President Kamonwan Wipulakorn discusses the company’s strategy and outlook.

Please explain Erawan’s business model.

Erawan operates in the hotel industry and focuses on quality assets and services. We view our activities from an investment standpoint and aim to be the leader in Thailand. As of the end of 2014 we had 5,289 rooms, the largest among listed companies in Thailand, and aim to reach 5,600 rooms by the end of 2015. Our properties range from budget to luxury in Thailand’s major cities and tourist destinations.

Erawan has a wide-ranging portfolio. How is each asset group performing?

Our portfolio covers various segments starting from luxury hotels such as Hyatt, Marriott, Renaissance and Luxury Collection; to midscale with Courtyard by Marriott, Holiday Inn and Mercure; economy with Ibis, and finally budget with our own Hop Inn brand. This year we expect growth in each segment ranging from 20% to 500%, as a result of the recovery in the tourism market and the additional room inventory.


Kamonwan: Politics, competition top risks

We will continue to expand the midscale, economy and budget segments as we see continued demand growth with limited supply growth. In addition, developing a luxury hotel today is more challenging because of the limited of quality locations. Overall our occupancy rates for Bangkok hotels are 85% and our upcountry hotels are also performing well.

Hop Inn is Erawan’s first branded hotel business. Why did you develop it and what are the plans for it?
We analysed the market for domestic corporate and SME travellers and found that the budget segment lacked a leading hotel network with brand recognition. Thus we are developing a Hop Inn brand that offers high value for its price point and consistent service quality throughout all locations in the country. This year we are opening five hotels and next year we plan 10 more.

Continue reading Co Visit: Erawan Group Plc (ERW)

Stocks in the news (advanc, age, banpu, cth, delta, eastw, estar, ifec, intuch, jsp, kcm, ktc, mint, ncl, scc, sccc, trc, tsr, tta, ukem, wha, world) 31.07.15

ADVANC has launched a campaign “AIS the startup 2015”. This is hoped to bring in younger entrepreneurs who are interested in using ADVANC as a digital partner. (Khao Hoon, 31/07/15)

AGE plans to increase investment in alternative energy. It is studying a waste power plant abroad to adapt to the local environment. 2Q15 is expected to be good aided by cost controls. It expects 2015 revenue of Bt7bn. (Thun Hoon, 31/07/15)
Comment: We’ve been hearing about AGE planning to do this for years now…

BANPU plans to list subsidiary “BANPU Power” in 2017. It expects its subsidiary to show 2015 net profit of Bt2.87bn with assets of Bt20.87bn. (Khao Hoon, 31/07/15)
Comment: With coal prices down some ~65% from its peak, its no surprise that Banpu has to shift to pure utility investments

CTH targets 2015 revenue of Bt6bn on higher monthly fees and new packages. It expects to boost the number of members to Bt3mn by the end of May 2016. (Khao Hoon, 31/07/15)

DELTA is confident 2015 revenue will achieve its 5-10% target growth. It expects 2H15 revenue to be better than 1H15 on a higher gross margin from the automotive sector. It says there is no impact from the baht depreciation. It plans to do acquisition to support R&D. (Khao Hoon, 31/07/15)

Continue reading Stocks in the news (advanc, age, banpu, cth, delta, eastw, estar, ifec, intuch, jsp, kcm, ktc, mint, ncl, scc, sccc, trc, tsr, tta, ukem, wha, world) 31.07.15

What happened this week 26/07 – 31/07

Note: This will be the last WHTW post including all the global news events, going forward it will just be a summary of 10 key points in total


  • FPO still confident of 3% growth despite export woe – The decline in Thai exports is not as bad as those experienced by some of neighbouring countries and, even with a contraction in shipments, the Fiscal Policy Office (FPO) estimates that 3% economic growth is within reach this year. (Bangkok Post, 27/7/15)
  • Shippers set to cut view once again – With negative factors still holding back shipments, exporters are set to further cut their forecast for the whole year. Thai National Shippers’ Council (TNSC) chairman Nopporn Thepsithar said if exports continued to contract in June, the council would revise down its export forecast again after last month’s prediction of a contraction of 2% from zero growth. The Commerce Ministry is scheduled to release June export figures today. (Bangkok Post, 27/7/15
  • Worst monthly export fall since 2011 deepens gloom – The Thai economy is going from bad to worse after June exports saw the biggest fall in three years and six months. The Commerce Ministry yesterday reported exports tumbled for a sixth straight month in June, down by 7.87% year-on-year to US$18.2 billion, leading the first-half performance to fall by 4.84% to $107 billion. It was the biggest drop in exports since an 8.15% fall in December 2011. Somkiat Triratpan, director of the ministry’s Office of Trade Policy and Strategy, attributed the fall largely to the slower-than-expected global economic recovery and low crude oil prices. (Bangkok Post, 28/7/15)

Continue reading What happened this week 26/07 – 31/07

Stocks in the news (akr, apco, beauty, bigc, ck, cpall, dcon, epg, eastw, genco, hmpro, kce, mtls, pdg, pylon, rs, samco, scc, sim, tisco) 29.07.15

AKR expects to get a 20MW solar farm from a cooperative which is expected to be concluded in August. It plans to invest in a power plant on 94 rai in Lopburi. It expects to show net profit in 2Q15, benefitting from booking revenue from its backlog. 2H15 performance is expected to be good backed by Bt500-600mn in revenue. (Thun Hoon, 29/07/15)

APCO plans an acquisition to increase its competitiveness. To fund this, it is issuing 250mn shares. It expects the acquisition to increase revenue by 2X-3X from last year. It expects to launch new products throughout the rest of the year. (Thun Hoon, 29/07/15)
Comment: I’ve never met the company, but I’ve marveled at the way the stock has been brokered all the way to 50x earnings.

BEAUTY plans to expand overseas, especially in ASEAN, first in Indonesia and Malaysia. It expects 2Q15 earnings to be good, with good earnings continuing in 2H15. (Thun Hoon, 29/07/15)
Comment: I … still … just … don’t … get …. it.

BIGC reported 2Q15 earnings of Bt1.9bn (+4.7% growth) with revenue of Bt34bn aided by SSS growth and expansion in its customer base. It expects to expand its business by opening more branches. It is confident 2015 sales will achieve its target. (Thun Hoon, 29/07/15)
Comment: Expect to see more cost cutting measures by BIGC, there is very little that they can now do to push top line growth.

Continue reading Stocks in the news (akr, apco, beauty, bigc, ck, cpall, dcon, epg, eastw, genco, hmpro, kce, mtls, pdg, pylon, rs, samco, scc, sim, tisco) 29.07.15

Stocks in the news (brr, chow, cpall, drt, cpn, eason, egco, gpsc, jas, simat, siri, spa, tfd, thani, top, trc, twz, ureka) 28.07.15

BRR plans to expand its cultivated area to 200,000 rai. It has done research to improve its sugar products. It plans to invest in a third biomass power plant by using bagasse as a fuel. (Thun Hoon, 28/07/15)
Comment: Again a natural extension of its existing business.

CHOW expects to add a 42MW solar farm in Japan and 15MW in Thailand. It has already got a 6MW of PPA and COD is end of 2015. It expects 2H15 earnings to be better than 1H15. (Thun Hoon, 28/07/15)
Comment: CHOW is expanding rapidly into the solar market.

CPALL expects 2Q15 earnings of Bt1.89bn (+39.5%YoY) backed by better SSS and higher gross margin. It expects 2H15 performance to be healthy aided by stamp campaign. (Thun Hoon, 28/07/15)
Comment: The story here is only about when it will off a stake in MAKRO

DRT plans to expand abroad, especially in CLMV by looking for local partners. It expects exports to comprise 15% of total revenue. (Dbbnews, 28/07/15)

Continue reading Stocks in the news (brr, chow, cpall, drt, cpn, eason, egco, gpsc, jas, simat, siri, spa, tfd, thani, top, trc, twz, ureka) 28.07.15

Biggest Thai Fund Sees Buying Opportunity After Stock Rout

In an article from Bloomberg last week, it stated how the CIO of the SSO commented on his personal blog that the market was appearing cheap, and here are the two following quotes:

Tourism and commerce companies in particular offer a bargain, Win Phromphaet, the head of investment at Social Security Office, wrote in his blog. Thai companies can endure an economic slowdown as they have high cash reserves and low debt, while the government and the Bank of Thailand have room to increase stimulus, he said.

“Weak sentiment may offer an opportunity for investing in some Thai shares for long-term investors,” Win, who helps manage 1.2 trillion baht ($35 billion) in pension contributions at SSO, wrote in his blog. The SET index is “very attractive” near 1,400, he said.

Now I don’t quite care for these comments, what is more interesting from my perspective is how the the market participants have changed (or not changed) in the Thai market for the past decade, whilst I don’t have the stats on me from the past, retail investors have traditionally represented ~50-60% of total trading, local institutions at ~10-15% (ex prop desks). Daily trading has increased from ~thb 15bn to ~thb 35 bn per day over the decade. Why is it the case that local institutions aren’t a larger portion of the market given the rise of asset management firms?