Random Thoughts – Governments, infrastructure, central going wild, sweet sugar and more…

Which country’s government set up is this?
440 members, 330 elected 110 appointed by the Military. If you thought of Thailand I wouldn’t blame you, that is Myanmar’s current structure, raises quite a few questions doesn’t it?
Thailand infrastructure projects 
These ones are postponed – Mr Peerapol said the three projects are the Pink Line electric train from Khae Rai to Min Buri, worth 56.6 billion baht; the Yellow Line electric train from Lat Phrao to Samrong, worth 54.6 billion baht; and the joint Thai-Japanese double-track Kanchanaburi-Bangkok-Chachoengsao-Aranyaprathet and Bangkok-Chiang Mai rail routes.
And these ones are going ahead – First of the four lines is the 132km Map Kabao-Jira route, which will cost Bt29.67 billion. The project, being considered by the National Economic and Social Development Board (NESDB), should be added to the Cabinet agenda in the second week of May. The targeted completion date is 2020.The second project, the 165km Nakhon Pathom-Hua Hin route costing Bt20.15 billion, should be ready by 2019, while the third is the 90km Hua Hin-Muang Prachuap Khiri Khan line worth Bt10.30 billion.
So what? It does prove that the government is hell bent on approving all of the dual track projects asap and effectively everything else takes a back seat.
Negative interest rates are the dumbest idea ever 
I’ve been following Jeff Gundlach for years and whatever he says you most likely should take it as a given. Here are some great quotes and the link to the rest of the interview
So you have to find a center piece idea that will be important in driving the market. And you have to have an intuition about how other investors will react if you’re right and they wake up to that idea.
Negative interest rates are designed to fight deflation. But they are the very definition of deflation: Your money is disappearing. As an investor, you are going to have less money in the future than you have today with negative interest rates.
Recessions don’t drive financial markets. It’s the other way around.
The markets have humiliated the Fed into abandoning their pretty idiotic forecast.
CPALL and BEC back in the news

CPALL and BEC have been in the news again, this time with Thaipat Institute who “has removed CP All Plc and BEC World Plc from its top 100 listed companies ranked by environmental, social and governance measures, citing the pair’s tainted corporate reputation. ” Normally I would have posted this immediately, but I’ve never heard of thaipat until this news And I doubt many other people had either. But he did have a rather priceless quote “Companies that have good practices but bad performance, and good performance but bad practices are worthless,” Mr Pipat said. If only the world was really that black and white.

Sweet Sugar
Getting our sugar fix will become pricier with a proposed sugar tax – Soft drinks will likely be 20-25% more expensive if the cabinet approves the sugar tax rates proposed by reform councilors.
Two rates of the excise tax were proposed based on different sugar levels. Drinks with more than 6g to 10g per 100ml of sugar would be subject to a rate that would raise their retail prices by at least 20%. Those with more than 10g of sugar would see their prices at least 25% higher.
So we did an extensive market survey at the office (a total of 5 people of which 2 drink sugar drinks) and when you do the numbers..well an ichitan branded drink will go from 12 baht to 16 baht..not quite the end of the world, so will demand disappear and will people stop buying these “sugary” products, nope. If a government was really concerned about the nation’s health, easy ban cigarettes. To the markets, both ICHI and OISHI took a slight hit – interesting factoid, ICHI is now below its IPO price.
Central going wild
Central Group has been on the prowl! First with Zalora and now BIG C Vietnam.
“AT CENTRAL GROUP, online shopping contributed only 0.5 per cent of total sales last year. In a country where mobile-phone penetration is more than 100 per cent, with smartphones accounting for 70 per cent of phones in use, it is more than obvious that the retail giant must step up its e-commerce to be ahead of rival retailers and small tech companies.”
So for the Zalora purchase, things are still being finanlised using their listed co, Central Online (COL). Now at first I thought that typically central group doesn’t pay crazy prices for anything, I hope they maintain it here. All of these ecommerce sites in Thailand, despite the amount of news and marketing are losing tonnes of money!! Where’s the value in a business that is constantly losing cash every year? Oh the subscribers? The network? You could argue it both ways, but in the end isn’t a business that doesn’t make $ rather pointless?
And then Central Group went ahead and beat TCC to buying BIGC Vietnam…so much for not paying crazy prices.
He said Big C Vietnam had 43 stores nationwide, comprising 33 hypermarkets and 10 convenience stores, and 30 shopping malls. “Total revenue in 2015 was approximately 586 million euros.”
“Casino yesterday on its official website announced the closing of the sale of Big C Vietnam to Central Group, for an enterprise value of 1 billion euros, implying 2015 multiples of 1.8 times net sales, 20.4 times EBITDA (earnings before interest, taxes, depreciation and amortisation) and 34.4 times EBIT.”
MAI call for more auditors
This has been a recurring issue since the SEC cut the auditor list by half 1.5 years ago. And they wonder why the growth in the capital markets are slow. Then again they are just a regulator….though I don’t think that Prapan knows what’s he talking, stock analysts almost never cover MAI listings nor any company that is typically below THB 30 bn in market cap. Why? It’s the business model, small companies – less liquidity – less commissions, but of course if there is a great story or a strong relationship then every once in a while you’ll see a smaller name covered.
“The shortage of auditors and financial advisers has led to slow growth in new listed companies, says Prapan Charoenprawat, president of Market for Alternative Investment (MAI). Mr Prapan said the market had seen growing demand for companies to list on the bourse because listed firms have successfully raised funds through their issuance of initial public offerings (IPOs) and other financial tools. The market, however, can only accommodate a fraction of them due to limited resources. “It’s not just a lack of financial advisers and auditors, we’ve also fallen short of stock analysts who can cover MAI listings, resulting in a lack of investor confidence,” he said.”

WHTW: Top 10

  • Yen soars, stocks slump as BOJ holds policy, pushes back inflation target — The Bank of Japan held off from expanding monetary stimulus on Thursday, defying market expectations for action even as soft global demand, an unwelcome rise in the yen and weak consumption threatened to derail a fragile economic recovery. (Reuters, 29/4/16)
  • Fed Waits for Economy’s Green Light to Hike as Risks Abate – The strong conviction about growth, inflation and global stability needed to raise interest rates didn’t show up for officials at the Federal Open Market Committee meeting this week. They’re still open to finding it soon. (Bloomberg, 28/4/16)
  • UPDATE 1-U.S. crude inventories rise less than expected – EIA – U.S. crude oil stockpiles rose last week to a fresh record high as lower refinery production offset a drop in imports, while distillate inventories fell more than expected, data from the Energy Information Administration showed on Wednesday. Crude inventories rose 2 million barrels in the week to April 22, compared with analysts’ expectations for an increase of 2.4 million barrels. (Reuters, 27/4/16)
  • Euro zone business growth slows despite discounting – PMI — Markit’s Composite Flash Purchasing Managers’ Index (PMI) for the euro zone, based on surveys of thousands of companies and seen as a good guide to growth, dipped to 53.0 from March’s 53.1, matching a 13-month low in February. (Reuters, 22/4/16)

Continue reading WHTW: Top 10

Stocks in the news (aot, bbl, bh, big, ck, gunkul, ifec, jwd, jubile, pttep, spali, sprc, super, tfg, thcom) 29.04.16

AOT has revised up its five-year investment plan from Bt140bn to Bt170bn. It expects nonaeronautical revenue to comprise 50% within three years. (Thun Hoon, 29/04/16)
NBTC seeks more info from BBL on Jas’s failure to pay licence upfront fee – THE NATIONAL Broadcasting and Telecommunications Commission will ask for more information from BBL regarding Jas Mobile Broadband’s failure to pay the initial upfront fee for its 900MHz license by the March 21 deadline. (The Nation, 29/04/16)
Comment: As if BBL really has to say anything…the NBTC is just trying to cover their ar$es for cocking up the auction
BH targets 2016 revenue growth of 8-10% from last year’s Bt17.9bn. It expects growth rate to be lower than 12% for 2011-2015 because of the economic slowdown. (Post Today, 29/04/16)
Comment: One interesting tidbit that I learnt was that the medical inflation in Thailand is one of the highest globally @ ~15% p.a.
BIG will pay a dividend of Bt0.06/share, paid on May 23. It expects 2016 revenue and net profit to be good. It plans to focus on the high-end market. It targets market share of 65% this year and 70% in 2017. (Thun Hoon, 29/04/16)
Comment: Boom! 
CK targets 2016 backlog to hit Bt200bn from Bt83bn. It says this will cover revenue for 3-4 years. It plans to take part in Bt480bn in bids, and get 20-25% to add to backlog. It will sign a contract with a Bt21.2bn project. It targets 2016 revenue of 38-40bn. (Thun Hoon, 29/04/16)
Comment: Slight delays in this government infrastructure spending isn’t exactly a negative for the larger contractors like CK, it gives them time and the capacity to bid for more and more projects that they may have not otherwise received if everything was released at one go..

Continue reading Stocks in the news (aot, bbl, bh, big, ck, gunkul, ifec, jwd, jubile, pttep, spali, sprc, super, tfg, thcom) 29.04.16

Co Visit: Golden Land Plc (GOLD)

Rebuilt Golden Land starting to shine


Mr Thanapol, president of Golden Land, still sees demand in residential housing.

Golden Land Plc (GOLD) is a leading residential and commercial real estate developer. President Thanapol Sirithanachai discusses the company’s strategy and outlook.

GOLD has undergone a successful turnaround over the past few years. How this was achieved?

In the first year of the turnaround, 2013, we rebuilt the foundation of the company, refocusing only on residential and commercial projects and improving our workforce, management teams and project management. We also expanded our team from 80 to 480 people today.

In 2014 we were able to unlock the value that existed within GOLD. We acquired additional assets and the developer Krungthep Land (KLAND), all of which combined to increase our revenues from 1.6 billion baht to 4.4 billion with a profit of 350 million, while our asset base grew from 12 billion to 21 billion baht.

In 2015 we continued building on our new base and now have low-rise products in townhomes and single detached houses across virtually every segment, as well as three office buildings in Bangkok. As a result we were able to pay our first dividend in seven years to our shareholders and plan to continue doing so as our performance improves.

Your shareholder base is interesting with Frasers Property recently acquiring a stake. How does Frasers add value to GOLD?

We issued an additional 685 million shares to Frasers Property Holdings (Thailand), the local unit of Frasers Centrepoint, at 7.25 baht per share for a total of 4.97 billion baht, and it now holds 29.5% in GOLD. Frasers is a fully fledged real estate group with assets in 70 cities around the world and a proven track record in large-scale, mixed-use developments.

Frasers also has REIT platforms in retail, commercial and hospitality. Thus we hope to benefit from its decades of knowledge so that we can take GOLD to the next stage.

Continue reading Co Visit: Golden Land Plc (GOLD)

Stocks in the news (acc, dcorp, delta, dtac, ifec, ilink, kkp, mc, ori, pace, sc, scc, smart, sr, super, syntec, tcmc, tks, tt, upa) 28.04.16

ACC expects to wipe out retained losses. It expects net profit to return to the black in 2016 after it expands its business to trading, property, and alternative energy business. It expects to pay a dividend this year on its turnaround. (Thun Hoon, 28/04/16)
Comment: A quick scan of the company shows that they have multiple holdings in alternative energy companies of ~5MW in total
DCORP is looking for a partner to invest abroad. It expects a decision to be made in May. It targets project IRR above 15%. It expects to show net profit this year. It expects its solar cell power plant to operate in 2H16. (Thun Hoon, 28/04/16)
DELTA expects 2Q16 earnings to turn around, backed by new products. It targets 2016 revenue to grow 10%. It plans to invest new plants overseas to increase its orders. (Khao Hoon, 28/04/16)
DTAC will cooperate with 4DBOOK to launch 4DBOOK FREE application, offering books on line, for one year (April 27, 2016 – April 30, 2017) for DTAC Reward customers. It expects 200,000 subscribers this year. (Khao Hoon, 28/04/16)
IFEC says Goldwin, a #1 windmill producer, is interested in investing with IWIND (10% stake) in order to expand to Asia. It expects the 10MW Pak Panang wind power plant to operate in 3Q16. It expects to take over a power plant company in Vietnam in May. (Khao Hoon, 28/04/16)

Continue reading Stocks in the news (acc, dcorp, delta, dtac, ifec, ilink, kkp, mc, ori, pace, sc, scc, smart, sr, super, syntec, tcmc, tks, tt, upa) 28.04.16

Stocks in the news (bay, bjchi, com7, delta, drt, eason, hmpro, kbs, modern, ndr, nwr, pttep, richy, scc, scn, sgp, super, tpch, tpipl, true) 27.04.16

BAY expects auto loans to grow 3% to Bt262bn despite a slowdown in new loans. It is looking for a partner to expand into loans for used cars. (Thun Hoon, 27/04/16)
Comment: I can see BAY actually taking away market share from TCAP in this. 
BJCHI will pay dividend of Bt0.5/share, payment on May 19. It took part in Bt6.5bn in bids, and expects the results to be announced in 2Q16. (Thun Hoon, 27/04/16)
COM7 signed a contract with TRUE to operate 166 True shops in BIGC and Tesco. It expects 2016 revenue to hit Bt17bn with net margin of 3%. (Khao Hoon, 27/04/16)
Comment: New iphone, new macbook, and now a new deal. I’m banging my head against the wall.
DELTA reported 1Q16 earnings of Bt1.25bn (+19%) because of lower sales in embedded power supplies and higher expense. (Khao Hoon, 27/04/16)
Comment: It appears that nearly every electronics manufacturing company in the region will have rather weak growth for the foreseeable future

Continue reading Stocks in the news (bay, bjchi, com7, delta, drt, eason, hmpro, kbs, modern, ndr, nwr, pttep, richy, scc, scn, sgp, super, tpch, tpipl, true) 27.04.16

Stocks in the news (aot, aqua, bigc, bjc, ccn, earth, ifec, ihl, maco, mtls, pttgc, qtc, singer, siri, smt, tsr, uv, xo) 26.04.16

AOT expects 2QFY16 earnings to peak backed by 197,913 flights (+9.4%) and 32.3mn passengers. It expects 389,272 flights in 1HFY16 (10.6% growth) and 61.2mn passengers. (Khao Hoon, 26/04/16)
Comment: It’s just incredible, time to start a pool on when passengers hit 100 mn
AQUA will pay dividend of 100% of profit with Bt900mn cash on hand. It plans to list its subsidiary (TCDC) by 3Q16. (Khao Hoon, 26/04/16)
Comment: I don’t know much about this business other than it being similar to MACO, but spin off’s are typically well-received by the retail market
BIGC has received the disclosure of additional information on the tender offer for the company’s securities from BJC Retail Holding Company Limited, BJC Supercenter Company Limited and Samphunsamer Company Limited, collectively the “Offerors”. (SET, 22/04/16)
CCN has backlog of Bt100mn on telecommunication projects, expects to book in this year. It expects to get more projects from Thailand post after it got Bt300mn. (Thun Hoon, 26/04/16)
EARTH will pay a dividend of Bt0.1/share. It expects 2016 revenue to grow not less than 10% by focusing on acquiring new customers at home and abroad. (Thun Hoon, 26/04/16)

Continue reading Stocks in the news (aot, aqua, bigc, bjc, ccn, earth, ifec, ihl, maco, mtls, pttgc, qtc, singer, siri, smt, tsr, uv, xo) 26.04.16

Stocks in the news (aav, bbl, cho, cpf, dtac, earth, planb, scc, sena, tacc, tfg) 25.04.16

Rumors that King Power has completed the deal to buy AAV stock from Tassapon group for Bt4.15/share, which is double book value. They are not buying over 25% to avoid a tender offer. (Kao Hoon, 25/04/16)
Comment: Another rumour re AAV, I don’t quite see why King Power would do this transaction. 
Regulator to sue BBL for payment — The broadcasting regulator will sue Bangkok Bank (BBL), the guarantor of cash-strapped Thai TV Co, after the bank failed to show up and pay 1.78 billion baht on behalf of the digital TV operator on April 18. (Bangkok Post, 25/4/16)
Comment: Then in theory JAS should be sued as well. This lawsuit could take decades to be sorted out.
CHO board approved a dividend of Bt0.0308/share. This will be both cash (Bt0.0058/share) and stock (10 old shares to 1 dividend). It plans to change its company name. It targets 2016 revenue growth of no less than 5-10% from last year. It has backlog of Bt650mn. (Thun Hoon, 25/04/16)
CPF targets average sales growth of 10% for the next five years. It expects sales to reach Bt700-800bn in 2020. It plans to expand its debenture to Bt100bn from Bt80bn. It plans to acquire a business in Brazil. (Kao Hoon, 25/04/16)
Comment: That would be quite the achievement, growing revenues by 40% over 4 years for such a large co, several acquisitions would have to happen
DTAC will not bid for 900 MHz. It reported net profit in 1Q16 of Bt1.3bn, down 45% due to fall in EBITDA, higher depreciation and costs. (Kao Hoon, 25/04/16)
Comment: So how much would you pay for their market share?

Continue reading Stocks in the news (aav, bbl, cho, cpf, dtac, earth, planb, scc, sena, tacc, tfg) 25.04.16

Management Trades 18/04 – 22/04

Notable Transactions

Buy(s) THB 337 mn

  • SCI – This part of the transaction looks to be a switch between shareholders
  • IFEC – No idea what K. Wichai is doing buying @ 7.29 and selling @ 7.20

Sell(s) THB 802 mn

  • SCI – See above, plus there was news that 2 funds bought 5% of shares in the co
  • PACE – Hmmm thats a substantial sale from one of the owners.
  • IFEC – See above
  • TVT – Well if your company was making THB 55 mn p.a. and the stock was trading @ 1.7 bn wouldn’t you sell too?


Market Update 18/04 – 22/04

The tale of the tape has been rather clear this year 1) Resources – i.e. oil prices have recovered very strongly from their lows and are dragging the market upwards 2) Banks have somewhat recovered as well. Now what has been dragging the market? Easy 1) Telco’s 2) Property, any chance of these turning around? Telco’s we are beginning to see more visibility and clarity on who the winners and losers shall be (read TRUE and ADVANC win, DTAC loses). Anything interesting this week? Not that I’m aware of other than 1Q earnings likely to continue coming out.

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