Emerging-Market Small Caps: A Distinct Growth Opportunity

This is a fact that several of us here know and love, Small/mid cap’s are, have always been, and will most likely continue to be under-researched, under-covered, it’s just the nature of the business. The clever folks over at Franklin Templeton have just put out a short research paper on it, here are some snippets and a link to the paper.

EM small caps are far from a niche investment, despite broad perceptions. The asset class represents more than 23,000 companies with an aggregate market capitalization of close to US$5 trillion1 and daily turnover of close to US$60 billion, constituting substantial proportions of overall emerging-market liquidity and market capitalization, as the chart below demonstrates. Accordingly, the sheer size of the EM small-cap investment universe provides abundant opportunities to uncover mispriced companies

emsmallcaps

 

 

 

 

 

 

 

Source: Franklin Templeton

Stocks in the news (ap, bem, bjc, genco, j, mill, mono, pimo, rojna, tvd) 31.08.16

AP

AP expects to open 12 new projects in 2H16 in total worth Bt25.58bn. This will support 2016 presales to hit its target of Bt31bn. Presales are at Bt14.07bn with backlog of Bt17.06bn, of which it will book Bt8.7bn this year. It is confident that revenue will reach target of Bt23.7bn. (Kao Hoon, 31/08/16)

Comment: One of the few property developers that may show growth next year, some analysts are writing +30% in EPS

 

BEM

BEM expects 4Q16 to be good, supported by more than Bt3.6bn in revenue from Sriratch expressway and Purple Line, with 2016 revenue of Bt13.1bn. It expects profit growth of no less than 9%. It expects no effect from the fare reduction for the Purple Line as it is offset by a steady increase in passenger volume. (Thun Hoon, 31/08/16)

BJC

BJC cut its 2016 revenue target growth to 7-9% in response to lower sales. However, it expects profit to increase from a change in is sales strategy . (Kao Hoon, 31/08/16)

Comment: Metro in VN looks exactly like MAKRO, regardless the story for BJC is all around BIGC

 

GENCO

GENCO has set up 2 subsidiaries to prepare to build a 9.9MW power plant. (Kao Hoon, 31/08/16)

J

J expects 2H16 continue to grow supported by booking more revenue. It targets 2016 revenue growth of 30%. It has budgeted Bt1bn to develop projects at Srinakarin worth more than Bt600mn and land acquisition which expects to open at the end of the year. It plans to set up an REIT worth Bt500mn next year. (Kao Hoon, 31/08/16)

Continue reading Stocks in the news (ap, bem, bjc, genco, j, mill, mono, pimo, rojna, tvd) 31.08.16

Stocks in the news (arrow, big, epg, gl, hpt, lalin, ldc, ndr, nncl, ori, qtc, rs, sappe, scc, scn, susco, synex, work, xo) 30.08.16

ARROW
ARROW expects 3Q16 earnings to grow supported by large orders, especially Suvarnabhumi phase 2 project from ILINK and ITD. It expects to get work on the MRT Green Line, with finalization by the end of this year. It expects 2016 revenue to reach Bt1.4bn. ( Khao Hoon, 30/08/16)
Comment: Perhaps we should just close our eyes and buy this given its continuous performance
 
BIG
BIG is budgeting Bt10mn to hold the 10th Big Camera Big Pro days. It expects this to push its 3Q16 revenue up above Bt5bn and expects net profit to mark a record high. (Thun Hoon, 30/08/16)
EPG
EPG expects 2QFY16 to be good brought by numerous orders. It expects FY2016 revenue to reach Bt11bn. It expects to complete 1-2 M&A transactions by the end of this year. It plans to hold a roadshow abroad to attract foreign investors. (Khao Hoon, 30/08/16)
Comment: And they continue to grow!
 
GL
GL partners with True Money. GL is forecasting a major boost to its already flourishing business in Cambodia through a new partnership with True Money, a mobile-payment subsidiary of True Corp in Thailand, that will significantly increase the sales of GL’s financial services via True Money’s extensive network of about 5,000 agents spread out nationwide in Cambodia. (Newscenter Local Press Release, 29/08/16)
Comment: That’s a clever move by both parties. GL still has its monopoly in Cambodia for motorcycle leasing for another 3-4 years and barring a crash in that economy they’ll continue to dominate, the question is only how much are you willing to pay for this

Continue reading Stocks in the news (arrow, big, epg, gl, hpt, lalin, ldc, ndr, nncl, ori, qtc, rs, sappe, scc, scn, susco, synex, work, xo) 30.08.16

Stocks in the news (a, akr, ama, banpu, bbl, bdms, erw, fsmart, genco, ilink, irpc, kcm, phol, pstc, sat, sci, snc, vng, wha) 29.08.16

A
A plans to open new projects worth Bt6bn to bring its backlog to Bt1bn. It expects 2016 revenue to grow 30% from Bt4.45bn last year, supported by more transfers. (Thun Hoon, 29/08/16)
Comment: One of the most stable stock price charts I have ever seen
 
AKR
AKR expects 3Q16 to turn to profit after booking backlog. It expects to bid for a new job in Thailand in 2H16. It targets 2016 revenue of Bt2.5bn and plans to do a JV with in Indonesia and Vietnam with local partners for power plants abroad. (Thun Hoon, 29/08/16)
AMA
AMA has filed for an IPO with the SEC of 108mn shares. It expects to expand its fleet and vehicles to allow it to get in on potential in Thailand and abroad. (Kao Hoon, 29/08/16)
Comment: No idea who this is, but looking forward to seeing another first day bounce
 
BANPU
BANPU is preparing to increase capital of Banpu Power or BPP to shareholders at a ratio 18-25 BANPU shares to 1 BPP share. It will pay an interim dividend of Bt0.25/share, XD on Sep 8. (Kao Hoon, 29/08/16)
Comment: Another capital increase. Getting ready for the listing of BPP in the near future perhaps. 
 
BBL
BBL will pay an interim dividend of Bt2/share, payment on Sep 23. (Kao Hoon, 29/08/16)
BDMS
BDMS expects 3Q16 to be outstanding due to high season and more customers. It expects 2016 profit to reach Bt9bn, growth of 15%. It plans to expand to 50 hospitals within 2-3 years. (Kao Hoon, 29/08/16)

Continue reading Stocks in the news (a, akr, ama, banpu, bbl, bdms, erw, fsmart, genco, ilink, irpc, kcm, phol, pstc, sat, sci, snc, vng, wha) 29.08.16

Market Update 22/08 – 26/08

So we are approaching the wonderful month of September where things normally go wrong. There are a litany of potential market negative news that could hit so lets see how everything unfolds. Sector wise, interesting that consumer products index hasn’t quite kept up the runs in services, and that insurance names continue to be weak – low rates aren’t a good thing for these mini investment houses.

00sum 01charts

Management Trades 22/08 – 26/08

Notable Transactions

Buy(s) THB 33 mn

  • N/A

Sell(s) THB 2.4 bn

  • MTLS – A huge sale from the owner. Does he not see a continuation of the 50% YoY growth after 2017?
  • TKN – Again the major shareholders sell, looks like a block trade
  • BEAUTY – See TKN
  • BA – Now this is a rarity, a sell out of BA. When will they get rid of their BDMS shares?
  • HMPRO – And he continues to sell
  • MCS – Ohh a first sell from this wonderful steel manufacturer.

mgmt_trades

Interview: Star Microelectronics Plc (STAR)

Diversification helps Stars to shine brighter

Stars Microelectronics (Thailand) Plc (SMT) has been listed on the Stock Exchange of Thailand since September 2009. Chief executive Peerapol Wilaiwongstien discusses the company’s strategy and outlook.

 

Stars is undergoing a transition. Could you walk us through this?

The company was founded in 1995 with an initial focus on integrated circuit (IC) packaging assembly, later expanding to additional products and printed circuit board assembly (PCBA). Our growth was interrupted as a result of the 2011 floods in Thailand, and with a loss of customers as well as a high reliance on one main customer, we decided there had to be a big change in the business.

Our vision for Stars is to become a global electronic manufacturing services (EMS) player, but in order to achieve this we have to set in place a strong foundation, which means a culture that takes into account all of the stakeholders in Stars. A strong foundation for us consisted of three factors: first, we had to become more cost-disciplined; second, we had to increase our focus on customers that were mature and provided reasonable profitability; and finally, we needed to have a diverse customer base across multiple industries.

What type of customers does Stars target?

We are more focused on advanced-technology products and are not specific to any particular industry. Currently we have five industries that we focus on: communication, medical devices, energy, the Internet of Things and infrastructure.

Within each of these industries we also want to have a diverse set of customers with their own business cycles — whether they are startups or mature businesses — because being diversified at both the industry and the customer level ensures that Stars can remain stable during periods of fluctuation within each industry. We are able to service these multiple industries because the fundamental process of electronics is similar across the board, with perhaps minor modifications to match the customers’ requirements.

Continue reading Interview: Star Microelectronics Plc (STAR)

WHTW: Top 10

  • Targeted strategies to boost exports being devised — With exports remaining sluggish, the Commerce Ministry is devising targeted strategies to improve the situation next year. (Bangkok Post, 22/8/16)
  • Economic corridor transport projects expected to go to Cabinet soon — DEPUTY Prime Minister Somkid Jatusripitak expects to propose the transport-system projects to serve the planned East Economic Corridor to the Cabinet in October.
  • Cabinet backs Sino-Thai high-speed railway deal – AFTER A LONG DELAY, the Sino-Thai high-speed railroad scheme looks set to shift into gear by year-end with Thailand funding all of the civil engineering work. (The Nation, 24/08/1
  • FPO says target won’t be achieved  — The government’s investment budget disbursement for this fiscal year, ending Sept 30, will fall short of its 87% target, a senior official at the Finance Ministry says. (Bangkok Post, 25/8/16)
  • Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals — Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration, saying the U.S. economy is already close to meeting the central bank’s goals and that growth will gain steam. “We are close to our targets,” Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he added, without giving explicit views on his rate outlook. (Bloomberg, 22/8/16)

Continue reading WHTW: Top 10

Stocks in the news (abc, ah, aot, asefa, ck, cpn, dcon, delta, ecl, gunkul, ifec, irpc, itd, loxley, phol, pps, tpch) 26.08.16

ABC
ABC is ready to start presales of ABOVE Sukhumvit 39 condo. It expects presales to reach 70-80%. It expects to wipe out its retained losses this year. (Thun Hoon, 26/08/16)
Comment: Argh….I’m bored of reading news about this company
AH
AH maintains 2016 revenue growth target at 5%, aligning with the auto industry. It expects 2H16 revenue to be better than 1H16 on the back of large orders. Its investment budget is Bt300400mn. It targets net margin to reach 10% in 2020. (Khao Hoon, 26/08/16)
Comment: With the reduced number of shares from their buybacks, a slight improvement in performance, could this company, for the first time in … a decade be the best performer out of all the automotive manufacturers?
AOT
AOT is budgeting Bt190bn to invest in six airports. It expects four contracts for Suvarnabhumi phase 2 to put up for bid by 2016. (Thun Hoon, 26/08/16)
Comment: Wow. If this really does happen could AOT hit 1,000? I wouldn’t bet against it.
 
ASEFA
ASEFA expects 2H16 performance to be good on seasonality. Its backlog is Bt1.82bn, of which it expects to book 60-65% this year. It plans to take part in Bt2.5bn bids and to get Bt700mn of this, which will raise backlog to Bt2bn. It targets 2016 revenue to rise 20%. (Khao Hoon, 26/08/16)
CK
CK revised up 2016 revenue target to Bt480bn from Bt38bn, backed by Bt80bn backlog, with project transfers expected soon. It plans to take part in Bt35bn in bids and to get the Bt25bn MRT Blue Line extension this year . (Khao Hoon, 26/08/16)
Comment: I wonder how the news decided THB 480 bn in revenue was possible?
CPN
CPN is budgeting Bt60bn to invest in five new department stores and to renovate five others. It targets 34 stores within 2018. It plans to expand to Vietnam and Indonesia. It targets 2016 revenue to grow 15%. (Khao Hoon, 26/08/16)
Comment: Watch them open a mall in Vietnam and Malaysia. 
 
DCON
DCON expects 3Q16 earnings to be good aided by numerous orders. It targets 2016 revenue to reach Bt1.1bn brought by transfers. It expects an extra gain of Bt105mn from selling land at Lopburi, booked in 2017 . (Thun Hoon, 26/08/16)
DELTA
DELTA plans to focus on ASEAN market because of higher demand. It plans for the ASEAN market to contribute 10% revenue. It also plans to focus on India. It plans to invest in an R&D center, with revenue from this in 2017. (Thun Hoon, 26/08/16)

Continue reading Stocks in the news (abc, ah, aot, asefa, ck, cpn, dcon, delta, ecl, gunkul, ifec, irpc, itd, loxley, phol, pps, tpch) 26.08.16

Stocks in the news (bem, kbank, kce, ksl, lhk, mint, nch, pylon, ratch, sena, sgp, smpc, thana, tpch, wice) 25.08.16

BEM
BEM will negotiate with the BMTA for the Blue Line extension job in September. It accepts that passengers on the Purple Line are not meeting its target and pulling down revenue by Bt0.8mn per month. The BMTA has approved a reduction in average passenger fare of 30% to Bt14-29 and expects this to boost passenger load by 30% from 20K. (Kao Hoon, 25/08/16)
KBANK
KBANK expects leading to rise on recovery of automotive market. It expects new loans of more than Bt75bn or growth of 35% to bring total loans to Bt93bn. It expects profit to be a new high at above target of Bt682mn. (Thun Hoon, 25/08/16)
KCE
A Japanese fund is interested in investing in KCE and expects to make a decision soon. It will spend Bt200mn to renovate its factory at Ayutthaya, with operations starting back up in 4Q16. It targets 2016 revenue growth of 10% from 2015, supported by more orders. (Thun Hoon, 25/08/16)
KSL
KSL targets 2016 revenue growth of 20% thanks to an increase in sugar price (2016-2017) of 30% to US$0.21/pound from US$0.15/pound last year. It plans to expand its sugar mill and is bidding for a PPA biomass power plant. (Thun Hoon, 25/08/16)
Comment: Just as with the comment for KTIS, could it be time for the sugar co’s to perform?

Continue reading Stocks in the news (bem, kbank, kce, ksl, lhk, mint, nch, pylon, ratch, sena, sgp, smpc, thana, tpch, wice) 25.08.16