Sawasdee – July 12, 2023

Market today

Although the SET was brightened by higher oil price, good news for the Energy sector, investors are waiting for the vote on Prime Minister tomorrow, limiting the upper bound at resistance of 1,510-1,520; supports are at 1,487 and 1,479. If it can hold without breaking down, signals are good.

Today’s highlights

• Fitch Rating has affirmed Thailand’s credit rating at BBB+ and maintains its outlook at stable.

• TAT has set its 2024 tourism target reach 100% of 2019 level (pre-COVID), generating Bt3tn in revenue or 16% of GDP.

• The acting cabinet approved to allow the cut in diesel excise tax to lapse as scheduled on July 20, to avoid creating obligations for the new government. The Oil Fund will be used instead to help cost of living.

• JAS requested amending the rental contract with JASIF by applying to terminate the rental assurance agreement and extend the current contract now scheduled to end on Jan 29, 2032 to Dec 31, 2038. We see this as more likely to pass the shareholders meeting than last time as GULF now holds 4.25% of JASIF shares. This is positive for ADVANC in the short term sentimentally negative for JASIF as dividend will be lower due to lower revenue from the new contract. However, in terms of price the impact is limited as it is compensated by a longer contract.

• IEA forecasts possible tight supply in the oil market in 2H23 due to oil demand in China and developing countries and reduced supply from OPEC+.

• Microsoft-Activision deal made progress after the court rejected the FTC’s request.

Strategy today

In the short term the SET will be pressured by the Fed’s Beige Book which expects slowed US economic activities and overly slow declines in US and UK inflation. At home keep an eye on the vote for the PM on July 13, 2023. We recommend “Defensive and Selective Buy”.

Trading today

Weekly portfolio: The SET is being pressured by politics and a slowed world economy. We recommend “defensive and selective buy” in themes with positive drivers:
1) Stocks whose 2Q23 profit is expected to grow YoY – AOT, BBL, ADVANC, MINT, OSP, BDMS and BEM.
2) Stocks with strong fundamentals that are seen as having high dividend potential with 2023 dividend yield of over 5% - TISCO, LH and AP.
3) For those who can handle risk, we recommend if the SET falls to around 1,450 speculate in stocks expected to recover after a steep fall in price that pulls PER and PBV below -1S.D. – CRC, GULF and SCGP.
In the short term we recommend avoiding investment in: 1) Food sector (TU CPF GFPT and BTG) which is seen by the market as likely to be downgraded as 2Q23 profit is expected to weaken QoQ and YoY; 2) stocks expected to be affected by El Nino in Commerce (GLOBAL), Finance (MTC, SAWAD), Automotive (SAT, STANLY), Beverages (CBG, where sugar plays a leading role in cost), hydropower (CKP) and Food & Agriculture (CPF and GFPT) and 3) Technology (DELTA, HANA and KCE) due to the conflict between China and the US and expected slow recovery in 2Q23 profit.

Daily Focus

BBL: 2Q23 profit is expected to grow 56%YoY and 8%QoQ, the strongest in its sector, supported by lower provisions and higher NIM. It is also positioned to benefit most from the upward interest cycle and has lower quality asset risk compared to other banks.
ADVANC: Overall competition in mobile phone business is steadily easing. 2Q23 profit is expected to grow YoY and QoQ. The company plans to pay an interim dividend of Bt3.5/share after reporting 2Q23 results.

Today’s reports

Petrochemicals – Spreads open 3Q23 weaker WoW
SCC – Preview 2Q23: Expect recovery QoQ
SCGP – Valuation attractive, recovery in sight