SIRI – 3Q66: กำไรสุทธิเพิ่มขึ้น YoY แต่ลดลง QoQ To move between 1,410-1,420 |
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Market today | The SET is expected to be range-bound with a lower bound at a support of 1,410, which is expected to be firm, meaning the index is likely to rise to the upper bound of resistance at 1,420. If it can break through, signs will continue positive with next resistance at 1,430. If the index falls below 1,410, it will be a resting sign with next support at 1,400. | Today’s highlights | • TAT expects 2.04mn trips by Thai nationals during the Loy Krathong festival on Nov 27, a 10%YoY increase. This is expected to generate cash flow of Bt6.1bn, a 5% increase. However, occupancy rate is expected to be only 58%. The cautious consumer spending and reduced purchasing power are due to a still-recovering economy and rising living costs, leading to slower growth in revenue compared to the number of tourist trips.
• US initial jobless claims last week increased by 13,000 to 231,000, the highest in three months. This indicates a slowdown in the US labour market.
• The US Senate passed a temporary budget bill, which will be sent to President Biden for signature today. If passed, this will avert a government shutdown until at least January.
• In China, prices of new homes in Oct in 70 cities fell by 0.38%, the sharpest decline in eight years, signalling a severe downturn in the real estate market despite the government's efforts to revive demand in the sector.
• Cisco Systems Inc. has lowered its profit forecast for next year due to a slowdown in demand for networking equipment. Walmart has also unveiled a profit forecast for FY2027 that is below market expectations.
• Alibaba Group has cancelled its plan to restructure and separate its Cloud Intelligence Group, which oversees its cloud computing and artificial intelligence businesses. This decision follows the US government's policy to ban the export of chips used in AI businesses to China, posing significant import challenges for Chinese companies from American firms. | Strategy today | Although the Thai capital market is facing high volatility, in the short term the SET is expected to recover as economic figures and world earnings results are not as bad as feared, while domestically there is the possibility an LTF will be set up and extend SSF. However, SET upside is seen to be limited from profit-taking after the end of 3Q23 earnings announcements. Our strategy is selective buy. | Trading today | Weekly portfolio: Although the Thai stock market is still facing high volatility, in the short term the SET may recover, though upside is limited. We recommend “selective buy” in themes with specific drivers:
1) Big-cap stocks expected to recover in line with the market with low volatility; we pick undervalued stocks whose prices have entered oversold territory and valuations are not stretched (PER and PBV 2023F are below 5-year average.) – BDMS, BEM, BBL GULF and SCGP.
2) Earnings plays whose 3Q23 earnings will be announced this week, with 4Q23 expected to grow YoY to the year’s best quarter – ERW, AOT, CENTEL, ZEN and CRC.
The Ministry of Finance has approved the establishment of the TESG fund to invest in stocks and bonds with a focus on ESG to stimulate long-term investment in the stock market. The fund offers a tax deduction of up to Bt100,000 per year with an 8-year holding period, which begins this December. It is expected to attract at least Bt10bn in capital. Selected stocks within the SETESG index that are of interest have the following characteristics: 1) those with an ESG Rating of “AAA” or “AA”, and 2) those who have seen a sharp YTD price drop. We identify five stocks of interest as potential investment targets - TOP, CRC, SCGP, GULF, and ZEN. (In the past, the ministry approved SSF on a special basis or SSFX during COVID to invest in Thai securities by not less than 65%, giving a tax reduction by Bt200,000 per year with an 8-year holding period and starting from Jan 1 to Jun 30, 2020. This brought in Bt20bn in funds into the market, and the SET index rose by 200 points.)
In the medium term we recommend being cautious on stocks that are expected to be affected by El Nino, which will erode purchasing power in the agricultural sector: Finance (MTC, SAWAD), Automotive (SAT, STANLY), Food & Agriculture (CPF GFPT and GFPT) and Beverages (CBG has high sugar cost).
| Daily top picks | BGRIM: Sentiment is improved by a decline in US bond yield and in prices of EU natural gas and Asia’s LNG, JKM. Management expects a decline in natural gas cost next year YoY. Renewable energy projects for which bids were won in 1H23 are standing by for PPA signing. A second round of bidding is expected early in 2024.
ADVANC: Although 4Q23 core profit may fall QoQ due to high season for marketing expense, core profit is expected to continue to improve on a YoY basis on better revenue related to tourism. In the short term there is a positive factor of slightly less acquisition cost for TTTBB. | Today’s reports | SIRI – 3Q23: Net profit up YoY but down QoQ |
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