- The last 3 weeks have been rather busy with traveling for both personal and work related activities, and yet really nothing happened much in the world, central banks were quiet, perhaps there was some temporary noise out of doha re oil prices but things have been relatively calm so to speak. First quarter numbers have started approaching, with Thai banks showing rather iffy #’s, the smaller ones i.e. tisco and kkp surprised to the upside with lower than expected provisions, but when I hear “Oh yes our NPLs are increasing but it’s ok we have provisioned against it” doesn’t quite inspire the confidence in me that I suppose it’s meant to, anyways to some random thoughts
- Europe – Flying to brussels was the aim at the end of March but because of the bombing, the flight had to be re-directed to frankfurt and to depart from Paris instead. The mood throughout the country was one of, well, despondence may be the best way to describe. Interestingly the majority of people seemed to be more upset with the Government. If you look at it from their viewpoint taxes are incredibly high, economic growth is tepid at best, the government is finding more ways to tax the citizens and then more immigrants that aren’t able to assimilate are given handouts by the government. Not quite the recipe for a happy populous.
- ASEAN – During songkran, my analysts and I flew to Malaysia and Singapore to attend broker conferences to meet multiple firms from throughout the region. Dr. Surin – finally got to meet the man and have a quick discussion 1 on 1, its a shame he can’t drive things in Thailand. Malaysia’s SWF Khazanah Nasional impressed me tremendously at a breakfast meeting, despite the country being home to what I suspect is the dirtiest politics in SE Asia, these guys know what they’re doing and I think they invest quite well. Firm’s in KL? Well if you thought that Thailand had a lot of property companies then you haven’t been to KL, household debt to gdp is far worse than Thailand and yet when you drive from KL center to the airport you see nothing but new condominiums being built. Are there good companies in M’asia? Absolutely I still take the viewpoint that it doesn’t matter where you are in the world you can always find a great idea, names that impressed me (doesn’t mean one should buy) include Time dotcom – I believe the largest ASEAN sub-marine cable co, Karex – the world’s largest oem condom manufacturer, and Inari Amerton – a semi conductor manufacturing co where 50% of it’s business comes from iphones. What about the other countries? Well again there’s a lot, perhaps the 2 name’s I had the most fun learning about was Naga City (hk listed) which runs the largest casino in Cambodia and Double Dragon – a retail/property company in the Philippines that proves retail investors are still incredibly dominant over there. As a quick aside – I love markets where retail investors are the dominant market participants it allows for stocks to reach their fair values (and more!) far faster and it also drives prices down far further than fair value – this volatility provides the best recipe for making a return. Institution dominated markets are boring.
- Panama Papers & Nepotism- I don’t see anything wrong with people or companies having an offshore company, of course when a politician has one and did NOT declare as required by their tax jurisdiction well then its a different story altogether. What drew my attention recently was this article in the Bangkok Post where this paragraph “One example could be the 600-million-baht land sale by Gen Prayut Chan-o-cha, who was then army chief, in 2013, disclosed under his asset declaration when he took office as prime minister, after the May 2014 coup. The transaction was connected to an offshore company in the BVI, linked to Charoen Sirivadhanabhakdi, the patriarch of the Thai Beverage business group and Thailand’s second richest man, according to Forbes’ 2015 list. In many other circumstances, this story would have scrutinised for unscrupulous gains and juicy details that may have violated the law. But this story has faded into oblivion for the time being. “ caught my eye. I do wonder if the author will be invited for a attitude adjustment (btw military people if you’re reading this, I love you, don’t arrest me). And then there were more articles in the local papers about nepotism (Bangkok Post). I’m not sure why people are surprised, this is rather normal in virtually any society, should it be? Well that’s a discussion for another time.
- Taxes – The government has decided to lower the tax for the majority of people, then again how many people in Thailand actually pay tax? They state there are some 10 mn tax payers, the last time i saw statistics I clearly remembered that only ~2 mn filed their taxes and ~1 mn actually had salaries high enough to pay. Anyways here are some figures. In theory who benefits? Consumer co’s, 7-11?
- Telco’s – Article 44 came out and spanked the NBTC into setting the next spectrum launch on the 27th May. So DTAC doesn’t look like they’ll participate (even though they could comfortably raise equity and join the party but telenor seems to be far more focused on Myanmar and India for now) AIS should take it unless TRUE decides to raise more capital and dominate the industry, also DTAC announced their earnings on Friday evening (SET) and they look awful but a clever man told me “look at their ARPU for post paid customers it’s the highest in the industry, how much would you pay to take those customers away from DTAC?” Perhaps THB 75 bn isn’t a too much to pay to take 50% of DTAC’s customer base.
- Larry Fink Chairman’s Letter to Shareholders (Blackrock) Most Chairman letters are rather good for falling asleep to, but at least here theres a decent section “Changes in the Investing Landscape” Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future. People need to invest more today to achieve their desired annual retirement income in the future. For example, a 35-year-old looking to generate $48,000 per year in retirement income beginning at age 65 would need to invest $178,000 today in a 5% interest rate environment. In a 2% interest rate environment, however, that individual would need to invest $563,000 (or 3.2 times as much) to achieve the same outcome in retirement.
- Now to show the other side to this argument would be the from the wonderful J. Stiglitz (Project Syndicate) where he writes ” Simply put, most firms – and especially SMEs – can’t borrow easily at the T-bill rate. They don’t borrow on capital markets. They borrow from banks. And there is a large difference (spread) between the interest rates the banks set and the T-bill rate. Moreover, banks ration. They may refuse to lend to some firms. In other cases, they demand collateral (often real estate).”
- This blog – Running a regional fund is taking up a lot of my time, thinking about other countries, currencies, industries and companies (which is incredibly fun), compared to before when all I dreamt about was Thailand hence the lower amount of posts on a daily basis. Thus for now it looks like I’ll just do a stocks in the news post and on Friday/Saturdays a long random thought post versus the past when I would just put some of these thoughts up when they popped in my head. Have a great Sunday.
ABC plans to invest in education business. It expects to sign an MoU with Lanna International School in Chiang Mai, valued at Bt150mn. It plans to launch the Bt2.5bn ABC Residence Sukhumvit39. (Khao Hoon, 13/01/16)
Comment: Wait…weren’t they going to do IT? And then renewable energy? And now its an international school and property development, gotta love the consistency here.
ACAP expects net profit this year after restructuring its business. It expects 4Q15 earnings to be good. It targets 2016 loan portfolio of Bt2bn. It plans to broaden its SME customer base. (Thun Hoon, 13/01/1)
DRT plans to export to CLMV+1. It targets exports to comprise 20% of sales. It plans to increase domestic sales via modern trade and property projects upon economic recovery. It expects 2015 net profit to be good. (Thun Hoon, 13/01/16)
Comment: Regardless, growth is minuscule for the company at this point.
EARTH plans to acquire a 40mn-ton mine. It targets 2016 revenue of Bt16bn. It expects exports to be good thanks to the baht weakening. (Thun Hoon, 13/01/16)
- 4G!!! From a green light to a red light to back to a green light. News has announced that the NBTC will go ahead with the auction of the 2 telecom licenses on the 900-MhW and that it has been approved by the board, thus 15 Dec looks like a go.
- AIS being sued by TOT – Wait, again? deja vu? is TOT bankrupt yet again? Is this just a media storm for the government to win votes? Or will they really go after ADVANC properly? If so that could be THB 108 bn that AIS has to pay back. If not, then the dip in the stock price will be another buying opportunity.
- SSI’s lasting impact – the Thai press TISCO have confirmed they will need to make more provisions and although not official I expect SCB and KTB will do likewise. According to the local press TISCO’s exposure is Bt 4 Bln, or at least that is what it was when the syndicated loan was issued. Again why doesn’t TISCO just come and state what we all know “We @#$#ed up with that stupid loan to SSI because we wanted to be a premium investment bank, obviously we do not know how to do credit analysis and now have to write off that huge loan which represented 20% of our shareholders equity at the time, BUT we hope to piggy back on the next government policy to drive up our earnings.” So if they do the provision, I’ve read estimates of THB 2bn in the 3Q15, do note thats close to 50% of 2015 projected earnings.
- Floods floods floods – You would think 4 years after one of the worst floods in the history of Thailand that something would’ve been done. However just these past few days Pattaya flooded after heavy rains due to the weekend tropical depression Vamco. The Meteorological Department warned that heavy rain will continue in the next three days. Five provinces, mostly Eastern Thailand, and Pattaya, were declared flood disaster zones. Oh and Bangkok is sinking, will the governor of Bangkok have anything clever to say this time? Btw impact on hotels/tourism? Short term. As usual.
- So the Fed – Nothing happened, USD has become weaker, equities, bonds are mixed and the VIX is done to zero. Most commentators are now pointing their fingers towards December, who knows? And frankly who cares? It’s not if/when they hike, its more of the rate of the hike…then again what if they lower rates in the future? Impossible? Look at Switzerland, Germany and Japan.
- The BOT – Not to be left out, earlier in the week the BOT decided to keep rates steady @ 1.5%. They now state they expect GDP growth below 3% this year and are looking forward and hoping for greener pastures for inflation and economic growth next year. So what? If oil prices rally back up and government infrastructure spending actually kicks off, then don’t be surprised to see inflation pick up and interest rates go higher in 2H16. If not then expect lower interest rates for a while. Fun times.
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.
BMCL expects 2016 to be a turnaround year after EXAT approved the merger with BECL, which will support growth. The company is going ahead with the Purple Line (Taopoon-Bangsue) (Thun Hoon, 24/07/15)
Comment: The story for BMCL is its merger with BECL.
BTS is in talks with U for a joint real estate development in the Phayathai-Chatuchak area. The company will hold a 35.64% stake. (Thun Hoon, 24/07/15)
Comment: BTS is already the largest shareholder in U (formerly known as N-PARK), so lets apply some guess work and assume that BTS will do condominiums with SIRI and other developments i.e. offices/malls w/ U
CCP management says delay in mega projects will have no impact on earnings, which are backed by Bt2.3bn in backlog. The company plans to invest Bt100mn in 50-60 rai in Bongsai for new railroad tie plant aimed to reduce cost. (Thun Hoon, 24/07/15)
BMTA meets today to examine results from truth-finding committee on the purchase of 489 NGV public buses after Minister of Finance approved the deal. (Kao Hoon, 24/07/15)
CRANE is talking with a Japanese partner for a JV or PP in order to expand its reach. Management confirms its strategy for M&A overseas. 2015 targets 20% growth YoY. (Thun Hoon, 24/07/15)
DCON is to report earnings 18 August, which is expect to come in strong, supported by Bt1.5bn worth of new condos. The biomass power plant deal is expected to finalize 4Q15. (Thun Hoon, 24/07/15)
Comment: The key driver behind DCON’s earnings this year was always the condominium transfers, the risk post recognising this is that their earnings will decrease rather dramatically
ACD targets 2015 revenue of Bt800mn with net profit backed by higher property transfers. It is talking to a prospective partner in China to invest in property development at tourist attractions in Thailand. (Khao Hoon, 23/07/15)
AOT expects bidding for Suvarnabhumi phase 2 be in February 2016. Total bids are valued at Bt43bn. Management is confident the plan will proceed as planned with operations starting in 2019. (Khao Hoon, 23/07/15)
Comment: At least this expansion is going ahead.
ASIMAR expects 2Q15 earnings to surge 2,700% on booking revenue from Port Authority of Sihanoukville and Tourism Thailand. 3Q15 profit is expected to rise backed by upcoming bids and increasing demand for ship maintenance service. It expects 2015 earnings to mark a record high. Investors are interested in a takeover at Bt4 per share. (Thun Hoon, 23/07/15)
BSBM expects to show net profit in 2Q15 from 1Q15 losses of Bt43.07mn aided by implementing cost control. It expects 2015 sales of 100,000 tons backed by large orders and the sale of all high cost products. (Thun Hoon, 23/07/15)
Comment: Never cared much for this company nor the industry that it operates, every steel co has suffered, is suffering and will continue to suffer.
CRANE is confident 2015 revenue will achieve target 4% growth. It expects a Bt100mn acquisition to be concluded in 3Q15. It expects business to continue to trend up in the rest of the year aided by government projects investment. (Khao Hoon, 23/07/15)
Comment: In theory they should benefit tremendously, demand for Cranes should sky rocket over the coming years.
CWT plans to invest in waste power plant, expects to sign PPA next month. It expects 2015 revenue of Bt1.2bn benefitting from cooperation with Japanese partner to expand abroad. (Thun Hoon, 14/07/15)
Comment: CWT has been one of those companies that has at times looked quite cheap, but according to long term market investors, it’s a shareholder group one should stay away from
EA expects to show a good performance in 2Q15 benefitting from seasonality. It is talking to a prospective partner to invest in a biomass power plant which is expected to be finalized soon. The plants in Phitsanulok and Nakhon Si Thammarat are expected to operate in 2016. (Thun Hoon,
Comment: The story hasn’t changed for EA, and they aren’t looking to expand into the VSPP (very small power producer)
EPCO targets 500MW power capacity within 2-3 years, 100MW this year. Management says the deal with a Japanese and European company is expected to be finalized soon. It plans to invest in a biomass power plant in South with a partner, expected to conclude this week. (Khao Hoon, 14/07/15)
IFEC has been selected to undertake a solar farm with Royal Thai Navy with a PPA for 60-100MW. It plans to take over other power plants in July. It plans to invest in a wind power plant in Korea. (Thun Hoon, 14/07/15)
Comment: Never hurts to have military connections in the shareholders
- Why do people love property more over stocks? Is it because its tangible? Perhaps it helps that your condo or house doesn’t have its value shown on a screen with second. So why not look at stocks in the same way as property? i.e. Find a good location/business, understand the key drivers for that location/business, buy at an undervalued price relative to these elements, close your eyes and open them again in 5-10 years? Ah because as humans we inherently want to know what the value of something is immediately, plus the leverage we can get in Thailand is incredible, 10% down, first 3 years are close to 0% interest payment, and they say the stock market is a gamble…
- It’s the economy stupid – has Thailand reached its peak in terms of economy growth potential? Some say yes others say no, high household debt, an aging population work against the long term story, but the potential of the growing economies in Vietnam, Laos, Cambodia, and Myanmar are still a positive for Thai co’s to expand.
- NPL’s – Is there something negative simmering on the balance sheets of the banks? If only KBANK has stated that NPL’s may hit ~2.8% of them by the end of this year, can we really believe that KTB’s NPL’s are only 2%? Or SCB’s for that matter? Or perhaps they have been clever in provisioning for these potential risks.
- Speaking of NPL’s – SSI & TISCO – SSI engaged in one rather adventurous M&A deal years ago, but still can’t make $ and has had a negative EBITDA ever since, Tisco has given them a loan for this, close to 25% of it’s own equity value, when will the proverbial shit hit the fan? Or is the BoT going to allow them to categorise the loans to SSI as however they please when infact it should be an NPL?
- Telco’s – 4G has been announced to occur by the 11th November, rumours have it that the government is pushing for a 4th telco operator to join, now who could do this? loxely, jas, samart, are names mentioned, but why would anyone want to?
- Digital Economy – The next solar craze? Government seems adament to be pushing these projects through, who will the winners be who will the losers be? Still many questions but something to look at in the near future
- Tonnes of Chinese Visitors – who really benefits? Tour operators, bus owners? But which listed co other than AOT and AAV?
- Bangkok is sinking – nothing new, we’ve known that for years, shouldn’t the government shift all civil servants to Saraburi? Or further up North/South? Maybe the Bangkok governor was correct in saying that we should all move to the mountains, have khao yai property prices reflected this yet? Or will Chiang Mai become the burgeoning growth center for the country over the coming decades?
- Investor Relations quality in Thailand – How does the quality of IR in Thailand compare to that of the rest of the region? Quite highly actually, even compared to the rest of the world, the quality of the presentations you find in Thailand are top notch, the only thing generally lacking is that the majority of Thai Co’s still don’t see the value in Investor Relation’s personnel. Regionally I think the Philippines is the leader for IR.
- The Government – Likely that they’ll stick to their timeline of 3Q16 as they’ve come to the realisation that running a country is their best forte, thus does this mean we’ll see all the infrastructure budgets approved by then? Other than the silly submarine, there is a lot of $ a stake here, I wouldn’t be surprised to see it all go through for reasons that I shouldn’t write.
APCO will expand marketing channel via APCO Digital Marketing, starting in April. The firm also expects Bt1.6bn in revenue with profit growing six-fold in 2015. The firm expects to move to the main board in 2016. (Kao Hoon, 25/03/15)
PPA needs to be completed before IEC will invest in a bio power plant with the capacity of 6MW. (Kao Hoon, 25/03/15)
IVL expects strong earnings in 2015 underpinned by the recent acquisition in two PET-PTA companies. The firm also indicated that the demand has recovered well in 1Q15, resulting in rising utilization rate. (Kao Hoon, 25/03/15)
Comment: They still aim to double EBITDA in the next five years